Issue of convertible debentures

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Querist : Anonymous

Querist : Anonymous (Querist)

20 January 2013 Sir, I want to know as which guidelines or notification of SEBI or FEMA has to be observed in order to issue Compulsorily Convertible Debentures to a Foreign Company by a Private Co.. What is the procedure to be adopted by a Private Co.

Ajay Mishra

Ajay Mishra (Expert)
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20 January 2013 Hi

ISSUE OF DEBENTURES BY A PRIVATE LIMITED COMPANY

STEPS INVOLVED IN ISSUE OF DEBENTURE

1. POSITION IN LAW:

(a) Under the Companies (Acceptance of Deposit) Rules, 1975 “any amount raised by issue of debentures (including convertible debentures) secured by the mortgage of any immovable property of the company and that the market value of the immovable property secured is higher than the amount of debentures issued” is not considered to be a DEPOSIT.

(b) Under Section 3(1)(iii)(d) of the Act, a Private Company is prohibited from accepting Deposit from persons other than its Directors, Members and their relatives.

(c) Hence, the Private Company must issue Debentures only as a Secured Debenture.

APPROVALS REQUIRED:

The following approvals are required to be obtained by the Company:

Approval Level Nature of approval
Board For issue of Debentures under Section 292(1)(b).
Board Creation / Declaration of Trust
Board Appointment of Debenture Trustees (Section 117B)
Board Approval of Draft Trust Deed
Board Approval of the Form of Debenture Certificate
Letter from Trustees Consent from the Debenture Trustees to act as Trustees

No approvals are required to be obtained under Section 293(1)(a) and (d) since, the Section does not apply to Private Limited Companies, unless it is a Subsidiary of a Public

Ajay Mishra

Ajay Mishra (Expert)
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20 January 2013 For, FEMA compliance, go to the following link:

https://www.caclubindia.com/articles/note-on-foreign-direct-investment-in-india-13412.asp#.UPwXHh2E2Jw

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Querist : Anonymous

Querist : Anonymous (Querist)

20 January 2013 Thanks Dude... the beard on ur chin really suits...:-)

Ajay Mishra

Ajay Mishra (Expert)
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20 January 2013 Thanks Mr. Pawan...............

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