Company AccountsQ-1 | Redemption of Preference SharesQuestion 5260 of 112
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What are the Provisions under the Companies Act, 2013 for issue of Debentures?

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Detailed Solution & Explanation

Provisions under the Companies Act, 2013 for issue of Debentures Section 71: (1) According to section 71(1) of The Companies Act, 2013, a company may issue debentures with an option to convert such debentures into shares, either wholly or partly, at the time of redemption. Provided that the issue of such debentures with an option to convert into shares, wholly or partly, shall be approved by a special resolution passed at a general meeting. (2) No company shall issue any debentures which carry any voting rights. (3) Secured debentures may be issued by a company subject to such terms & conditions as may be prescribed. (4) Where debentures are issued by a company "under this section, the company shall create a debenture redemption reserve account out of the profits of the company available for payment of dividend and the amount credited to such account shall not be utilised by the company except for redemption of debentures.

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Debentures

Long-term debt instruments issued by a company to the public for raising loan capital, carrying a fixed rate of interest (coupon rate) payable regardless of profit. Debenture holders are creditors, not owners, of the company.

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