The company cannot issue prospectus to the public or its members exceeding Rs 500 for the subscription of its debentures. The Certificate of Debentures must be issued within 6 months of allotment of debentures. As per the Debenture agreement, interest rate, payment mode of interest, redemption of debentures is fixed.
When can a company issue debentures?
A Company cannot issue debentures to more than 500 people without appointing a debenture trustee, whose duty would be to protect the interest of Debenture Holders and redress their grievances. On issue of debenture, a Company shall create a Debenture Redemption Reserve (DRR).
When do companies issue debentures to the public?
When a company invites application from the public to apply for debentures, it can issue its debentures in either of the following ways: When the issue price and face value of a debenture are equal, it is known as the issue of Debenture at Par.
What are the advantages and disadvantages of a debenture?
It is also cost-effective when compared with other forms of lending. Debentures usually provide a fixed rate of interest for the lender, and this has to be paid before any dividends are issued to shareholders. Control of the company by existing shareholders is not reduced, and profit-sharing remains in the same proportion.
How to regulate issue of non convertible debentures?
Issue of the Non-Convertible Debentures. The company needs to file MGT-14 with the ROC (Registrar of Company), within thirty days of passing Special Resolution in the EGM. The company needs to restrict the offer letter to a maximum of 200 investors in any financial year; The investment size for each investor should not be less than Rs. 20000.
What to do with excess money from debentures?
So, the company refunds the money to the applicants to whom debentures are not allotted. However, the excess money received from applicants who are allocated debentures are not refunded. The same money is used towards allotment adjustment and the subsequent calls to be made.
