Thursday, 9 October 2014

Companies Act 1956: Debentures

Debentures are the loans taken by any company from the public hence debenture is a type of loan capital raised by any company. Debentures have the following features:
  • Debenture holders do not have any voting rights.
  • Debentures have a fixed rate of interest.
  • Debenture Holders do not participate in management of company.
  • Debenture Holders are not the owners of company.
  • Debentures are of different types and depending upon their type company may issue debentures according to need.

Debenture Certificate:
Every company issuing debentures must issue debenture certificate within 3 months of the allotment of debentures, hence the debentures must be issued in the form of certificate after allotment. In this case if the company commits a default the company and its directors are liable to punishment which may be 2 years imprisonment or fine of Rs. 5000 per day of the default.

Debenture Redemption reserve:
It is a fund created by the company for redemption of debentures. According to the companies act and also according to the SEBI guidelines it is compulsory for the company to issue debentures and the company must create a DRR for the redemption of debentures.

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