Debenture
Debenture
Debenture
Kinds of debenture
Bearer Debentures
By making debenture repayable to bearer they are invested with the character
of a negotiable instrument, so as:
1. to make them transferable free from equities;
2. to render the delivery of a debenture and any interest coupon a good
discharge to the company;
3. to enable the bearer to sue the company in his own name, if necessary;
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To ensure a good title to any person who acquires the debenture
4.
bonafide for consideration, notwithstanding any defect in the title of the
person from whom he acquires it."
The interest on 'bearer debentures' is paid by means of attached
coupons. On maturity the principal sum is paid to the bearer.
2. Registered Debentures
These are debentures which are payable to the registered holders, i.e.,
persons whose names appear in the register of debentures. Such debentures
are transferable in the same way as shares are in accordance with the conditions
endorsed on their back. The debenture itself consists of two parts:
5. Convertible Debentures
A company may also issue convertible debentures, in which case an option is
given to the debentureholders to convert them into equity or preference share at
stated rates of exchange, after a certain period.
Debenture Certificate
Section 113 requires the debenture certificate to be issued within 3 months of the
allotment. In case of transfer, the same must be issued within 2 months after the
application for transfer. CLB may extend the aforesaid period but not beyond 9
months, if it is satisfied that it is not possible for the company to deliver the
certificate within the said period.
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Debenture trustee and trust deed:
The Companies (Amendment) Act, 2000 has added two new Sections, viz., 117A
and 117B relating to debentures trust-deed and debenture trustees. Section
117A stipulates that a trust deed for securing any issue of debentures shall be in
such form and shall be executed within such period as may be prescribed. It may
be noted that SEBI Guidelines, 2000 specify a period of six months from the
closure of the issue for listed companies.
Inspection and copy of trust deed — Sub-section (2) of Section 117A
empowers any member or debentureholder of the company to inspect the trust
deed and obtain copies of the same on payment of the prescribed amount.
Penalty for non-compliance — If inspection of trust deed or copy of the trust
deed is not made available to any member or debentureholder of a company, the
company and every officer of the company, who is in default, shall be punishable,
for each offence, with fine which may extend to Rupees five thousand hand for
each day during which the offence continues.
Functions of the debenture trustee —Section 117B (2) lays down that,
subject to the provisions of the Act, the functions of the debenture trustee shall
generally be-
• to protect the interest of holders of debentures (including creation of
securities within the stipulated time); or
• To redress the grievances of holders of debentures effectively.
• to ensure that the assets of the company issuing debentures and each of the
guarantors are sufficient to discharge the principal amount of the
debentures at all times;
• to satisfy himself that the prospectus or letter of offer does not contain any
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matter which is inconsistent with the terms of the debentures or with
the trust deed;
• to ensure that the company does not commit any breach of covenants
and provisions of the trust deed;
• to take reasonable steps to remedy any breach of the covenants of the
trust deed or the terms of issue of debentures;
• To take steps to call a meeting of holders of debentures as and when such
meeting is required to be held.
• To appoint a nominee director on the Board of directors of a company, in the
event of two consecutive defaults in payment of interest on debentures or default
in creation of security for debentures or redemption of debentures.
• To send communication to debenture-holders on a half-yearly basis in
respect of compliance of terms of issue by the company, as also defaults made
by the company, if any, in payment of interest or redemption amount and
action taken
2. The company shall credit the DRR adequate amounts from out of its profits
every year until such debentures are redeemed.
3. DRR shall be utilised by the company only for the purpose of redemption of
debentures
.
4. The company shall pay interest and redeem the debentures in accordance
with the terms and conditions of their issue.
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for every day during which the default continues.
Tata Motors Ltd, India's leading vehicles maker, has raised 42 billion rupees
($884 million) through an issue of non-convertible rupee debentures, the
company said.
The funds will be used to partly repay a $3 billion bridge loan Tata Motors had
raised last year to acquire marquee brands Jaguar and Land Rover,
It had already repaid $1.11 billion of the loan and the remainder is due for
repayment on June 2.
Citigroup and Tata Capital were the lead arrangers for the issue.
Srei Infrastructure Finance plans to raise Rs 1,000 crore ($200 million) in the
current fiscal year through non convertible debentures