Issue of debenture

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AJIT MISHRA (Querist)
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03 November 2012 RESPECTED EXPERTS,

CAN A PRIVATE LIMITED COMPANY ISSUE DEBENTURE? IF YES THAN WHAT KIND OF DEBENTURE IT CAN ISSUE AND WHAT ARE THE CONDITION FOR THAT?

THANKS

Ajay Mishra

Ajay Mishra (Expert)
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03 November 2012 Hi

ISSUE OF DEBENTURES BY A PRIVATE LIMITED COMPANY:

STEPS INVOLVED IN ISSUE OF DEBENTURE

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)(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.

Ajay Mishra

Ajay Mishra (Expert)
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03 November 2012 APPROVALS:
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 Company.

Ajay Mishra

Ajay Mishra (Expert)
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03 November 2012 Hi

You can issued Non-Convertible/Partly-Convertible and Fully Convertible.

The details of debentures is required to be given in Annual Return of the Company.

AJIT MISHRA

AJIT MISHRA (Querist)
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06 November 2012 Thank You very much sir, One more query is that is there any form to be filed with roc or any other government authority?

Ajay Mishra

Ajay Mishra (Expert)
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06 November 2012 Hi

No need to file any form.

AJIT MISHRA

AJIT MISHRA (Querist)
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06 November 2012 THANKS YOU

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