Sage-Tips

Can an unlisted company issue debentures?

A Company can only issue Secured Non-Convertible Debentures (NCD’s). In case of issue of NCD’s by a Company not constituting a charge on the assets of the Company, it shall be mandatory for listing of the securities on the recognized stock exchange so that same does not come under the purview of deposits.

What are the rules relating to issue of debenture?

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).

What are the limitations of debentures?

Disadvantages of Debentures

• Each company has certain borrowing capacity.
• With redeemable debenture, the company has to make provisions for repayment on the specified date, even during periods of financial strain on the company.
• Debenture put a permanent burden on the earnings of a company.

How can unlisted public company raise funds?

i) Call a Board meeting to approve right issue including “letter of offer”, which shall include right of renunciation also. iii) Receive acceptance/renounciation/rejection of rights from members to whom offer has been sent & also from persons in whose favour right renounced.

What is the maximum limit of discount on issue of debentures?

However, shares can be issued at discount in accordance with the provisions of Section 79 of The Companies Act, 1956 which stipulates that the rate of discount must not exceed 10\% of the face value while debentures can be issued at any rate of discount.

Is section 42 applicable to private companies?

A company making a private placement cannot offer its securities through any public advertisements or utilise any marketing, media, or distribution agents or channels to inform the public about such an offer. …

How can a private limited company issue debentures?

Procedure for issuing compulsorily convertible debentures

1. Notice for holding a board meeting.
2. Convening meeting of Company’s board of directors.
3. Hold extraordinary general meeting & Filing of MGT-14.
4. Circulate offer letter.
5. Filing of GNL -2.
6. Convening meeting of company board of directors after receiving of application money.

Can private limited company issue unsecured debentures?

Yes, a Private Company can issue bonds/debenture under the Companies Act 2013. A Private Company can do private placement and also listing the same in BSE or NSE under the debt segment after complying with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Are debentures good or bad?

Debentures – good or bad? In essence, debentures are a necessary aspect of raising money for a business. Some lenders won’t lend above a certain amount without a debenture, so regardless of how much you’re looking to borrow, you should be prepared to offer up your assets as security.

Can an unlisted company issue 0\% debentures?

Yes. Unlisted Company can issue 0\% debentures. But in case if its not compulsorily convertible debentures (CCD) within period of 5 years from the date of issue, the same needs to be secured. In case if CCDs are issued with convertibility within period of 5 years from the issue, it can be unsecured debentures as well.

How debentures can be secured?

(2) Issue of debentures shall be secured by the creation of a charge on the properties/assets of the company/ its subsidiaries/ its holding company/ its associates companies, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon

Can a private company issue bonds/debenture under Companies Act 2013?

Yes, a Private Company can issue bonds/debenture under the Companies Act 2013. There are regulations with respect to maintain asset cover, credit score rating, debenture redemption reserve, hold liquid assets for current maturities, etc.

Can a company issue debentures with option to convert into shares?

As per Section 71 of the Companies Act, 2013, a company can issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption.