Q.Explain the procedure for the issue of debentures by a public company.

The debenture-issue procedure closely mirrors a public issue of shares, but with two extra steps specific to debentures: a Debenture Trust Deed and, where relevant, a shareholders' special resolution.

The procedure a company follows to issue debentures to the public closely parallels the procedure for a public issue of shares, with the Secretary coordinating the process throughout.

The Board of Directors first passes a resolution at a duly convened Board Meeting, deciding to raise funds by issuing debentures and settling the broad terms of the issue. Where the debentures are to carry a conversion option, the company additionally obtains shareholder approval by a special resolution at a general meeting, as Section 71(1) of the Companies Act, 2013 requires; an ordinary, non-convertible issue needs no such resolution. Where the debentures are to be secured, the company next appoints a Debenture Trustee and executes a Debenture Trust Deed with that Trustee, setting out the charge created over the company's assets and the powers the Trustee holds to protect debenture-holders' interests, per Section 71(3). The company then drafts and files a prospectus (or, for a private placement, an offer letter) inviting subscription, obtaining any regulatory approvals a public offer of this security requires before the offer opens to investors. Application forms, together with the prospectus, are then made available to prospective investors, who remit their application money to the bankers to the issue within the period the offer remains open. Once the subscription list closes, the Board meets again to pass a resolution of allotment, allotting debentures to successful applicants and refunding money received from unsuccessful or excess applicants. Finally, the company issues debenture certificates to the allottees within the statutory period, enters their names and holdings in the Register of Debenture-holders, and, where the issue is t …

Students often omit the Debenture Trust Deed / Debenture Trustee step entirely, treating the procedure as identical to a share issue — it is not, and this step is specific to a secured debenture issue. Another common gap is forgetting tha …