Issue of debentures

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 August 2013 Hello Friends,

I would seek your help to understand how to determine the Debentures in any company. I am a part of Pvt. Ltd Co having a paid up & Autorized capital worth Rs 100millions & 150 Mns respectively. Could anyone please suggest How the Debenture concept works and upto what exrent my company can issue the debentures. Please do let me know the process as well.

Many Thanks for all the supports.

Rgards,

Ajay Mishra

Ajay Mishra (Expert)
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29 August 2013 Hi

Debentures is not part of Authorised and paid up share capital. It is different from share capital.

Please check what your articles says.

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 Thanks Mr Mishra.. Could you please suggest What are the guidelines and procedures for issue of debentures by Pvt & Pub Ltd Corporates??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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02 August 2024 The issuance of debentures by Private Limited and Public Limited Companies involves several guidelines and procedures as outlined in the Companies Act, 2013. Here’s a detailed overview:

### **Guidelines and Procedures for Issuing Debentures**

#### **1. Private Limited Companies**

**1.1. Types of Debentures:**
- **Secured Debentures:** Backed by a charge on the assets of the company.
- **Unsecured Debentures:** Not backed by any charge on the company’s assets.

**1.2. Procedure:**

**1.2.1. Board Approval:**
- The board of directors must approve the issuance of debentures.
- A board resolution is required to approve the terms and conditions of the debenture issuance.

**1.2.2. Offer Letter:**
- Prepare a private placement offer letter (Form PAS-4) specifying details of the debentures, including the amount, tenure, interest rate, and repayment terms.

**1.2.3. Filing with Registrar:**
- File the offer letter with the Registrar of Companies (RoC) and obtain a certificate of registration from the RoC.
- Maintain a record of the offer in Form PAS-5.

**1.2.4. Debenture Trust Deed:**
- For secured debentures, execute a debenture trust deed to safeguard the interests of debenture holders.

**1.2.5. Allotment:**
- Issue the debentures to the investors and record the allotment in the company’s records.
- Issue debenture certificates to the holders.

**1.2.6. Compliance with SEBI Regulations:**
- Although not listed, ensure compliance with applicable SEBI (Securities and Exchange Board of India) regulations if applicable.

#### **2. Public Limited Companies**

**2.1. Types of Debentures:**
- **Convertible Debentures:** Can be converted into equity shares after a specified period.
- **Non-Convertible Debentures (NCDs):** Cannot be converted into equity shares.

**2.2. Procedure:**

**2.2.1. Board and Shareholder Approval:**
- Obtain approval from the board of directors and pass a special resolution in the general meeting to issue debentures.

**2.2.2. Prospectus or Letter of Offer:**
- Issue a prospectus (for public issuance) or a letter of offer (for private placement) with detailed terms of the debentures.
- File the prospectus with the RoC and obtain approval from SEBI if applicable.

**2.2.3. Debenture Trust Deed:**
- Execute a debenture trust deed if issuing secured debentures, appointing a debenture trustee.

**2.2.4. Filing and Compliance:**
- File Form PAS-3 with the RoC regarding the allotment of debentures.
- Ensure compliance with SEBI regulations, if applicable, including filing necessary disclosures.

**2.2.5. Allotment and Issuance:**
- Allot the debentures to the investors.
- Issue debenture certificates and update the records with the details of debenture holders.

**2.2.6. Post-Issuance Compliance:**
- Comply with ongoing disclosure requirements and ensure timely payment of interest and principal as per the terms of the debentures.

### **Key Considerations:**

- **Secured vs. Unsecured:** Decide whether the debentures will be secured or unsecured and comply with the relevant regulations for each.
- **Legal Documentation:** Prepare and file all necessary documentation, including offer letters, prospectus, debenture trust deeds, and allotment forms.
- **Regulatory Compliance:** Adhere to regulations set by SEBI, RoC, and other relevant authorities to ensure a smooth issuance process.
- **Financial and Legal Advice:** Consult financial and legal advisors to ensure compliance with all legal requirements and to structure the debenture issuance effectively.

### **Drafting Documents:**

For drafting documents such as the board resolution, debenture trust deed, or private placement offer letter, consult with legal professionals to ensure that all required legal language and terms are properly included.

By following these guidelines and procedures, both Private and Public Limited Companies can issue debentures in compliance with the Companies Act, 2013, and other applicable regulations.

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