Justify the following statement: Debenture trustees are appointed by a company issuing debentures.

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Q. Justify the following statement: Debenture trustees are appointed by a company issuing debentures.

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2025Subjective· 4mImportance★★★★★

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The statement is justified. A company that offers debentures to the public (or to more than 500 persons) must, by law, appoint debenture trustees before the issue. The trustees act as guardians of the debenture holders, protecting their money and rights throughout the life of the debentures.

Debentures are instruments of borrowing that carry a fixed rate of interest and are usually secured against the company's assets. Since debenture holders are creditors who lend money to the company, the law provides a mechanism to protect their interests through debenture trustees.

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2022Set ANNUAL3 marks

Q. Study the following case/situation and express your opinion. Sunflower limited company proposes to issue debentures to the public to raise funds. After discussions, the Board of directors has decided to issue secured, redeemable, non-convertible debentures with o tenure of ten years. Please advise the Board on the following matters: Should the company appoint a Debenture Trustee? Should the company create a charge on its assets? Can the tenure of debentures be less than ten years?

Sunflower limited company proposes to issue debentures to the public to raise funds. After discussions, the Board of directors has decided to issue secured, redeemable, non-convertible debentures with o tenure of ten years. Please advise the Board on the following matters:
Should the company appoint a Debenture Trustee?
Should the company create a charge on its assets?
Can the tenure of debentures be less than ten years?

›Reveal solution

Sunflower Ltd. must appoint a Debenture Trustee, must create a charge on its assets, and may keep the tenure below ten years since ten years is only the maximum limit.

Sunflower Ltd. proposes to issue secured, redeemable, non-convertible debentures for a tenure of ten years. The Companies Act, 2013 provides clear guidance on each point.

Should it appoint a Debenture Trustee? Yes. When debentures are offered to the public (or to more than 500 persons), the company must appoint a debenture trustee to protect the interests of debenture-holders and execute a debenture trust deed.
Should it create a charge on its assets? Yes. Because the debentures are secured, the company must create a charge (security) on its assets in favour of the debenture-holders, so that they can be repaid from those assets if the company defaults. …

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Q.Justify the following statement:
Debenture trustees are appointed by a company issuing debentures.

Concept understanding — Provisions for Issue of Debentures under the Companies Act, 2013

Q.Justify the following statement: Debenture trustees are appointed by a company issuing debentures.

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Q.Justify the following statement:
Debenture trustees are appointed by a company issuing debentures.

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