Question: Why Is Debenture Trustee Required?

What is debenture holder?

A person having the debentures is called debenture holder whereas a person holding the shares is called shareholder.

A shareholder subscribes to the shares of a company.

On the other hand, debenture-holders are the subscribers to debentures.

Debentures are part of loan..

Why do companies issue debentures?

Why do company issue debentures, when they can borrow money from Bank. … When bank lend money they generally place restriction on how that money can be used. ex- borrowed fund can be used only for capital expenditure or they limit companies ability to raise additional funds till this loan is repaid. etc.

Can a private company issue unsecured debentures under Companies Act 2013?

Section 71: – A Company may issue debentures with an option to convert into shares, wholly or partly, at the time of redemption but cannot issue debentures with voting rights. … If there is any default with the provisions of this section then the Company and the Officers shall be liable to fine or imprisonment or both.

Can a trust issue debentures?

Any provision contained in a trust deed for securing the issue of debentures, or in any contract with the debenture-holders secured by a trust deed, shall be void in so far as it would have the effect of exempting a trustee thereof from, or indemnifying him against, any liability for breach of trust, where he fails to …

Who is known as debenture trustee?

Debenture trustee is a person who safeguards the interest of debenture holders and serves as a liaison between the issuer company and the debenture holders.

Who can issue a debenture?

Corporations and governments can issue debentures. Governments typically issue long-term bonds—those with maturities of longer than 10 years. Considered low-risk investments, these government bonds have the backing of the government issuer. Corporations also use debentures as long-term loans.

What are the rights of debenture holders?

Rights as a Debenture HolderTo receive interest / redemption in due time.To receive a copy of the trust deed on request.To apply for winding up of the company if the company fails to pay its debt.To approach the Debenture Trustee with your grievance, if any.

Can a listed company issue unlisted debentures?

16 March 2010 can a listed company issue unlisted non convertible debentures to a bank on private placement basis……….? … You will have to file the Information memorandum and the Listing Application Form duly filled for listing of debentures. In case you require any other details, please state.

What is difference between share and debenture?

Shares and debentures both are ways to raise capital however debentures are borrowed capital whereas shares are a portion of the company’s capital itself.

What is a debenture trust deed?

A Debenture Trust Deed is a document created by a company as security that is issued by the company to protect the interest of a denture holder, where trustees are appointed. … A trustee is usually appointed in such situations to serve as an intermediary between the company and the debenture holder.

Can debentures be redeemed before maturity?

This is the simplest option of redeeming the debentures. … The company may choose to pay the debentures before maturity also which is at the option of the company. The amount of payment and the date is known to the company in advance and therefore, they can manage the resources accordingly.

What is debentures Upsc?

Debentures are long-term financial instruments that are issued by companies to borrow money. Some debentures have a feature of convertibility into shares after a certain point of time at the discretion of the debenture holder.

What is Debenture example?

The definition of a debenture is a long-term bond issued by a company, or an unsecured loan that a company issues without a pledge of assets. An interest-bearing bond issued by a power company is an example of a debenture.

Are debentures safe?

In fact, since 1999, the company virtually stopped paying interest on the secured debentures issued by it. … Hence, the moral of the story is that, an investor should not be misled by the fact that when a debenture is secured against the assets of the company means it is a safe and secure investment.

What is the role of debenture trustee?

What is the role of Debenture Trustee? Duties of the Debenture Trustee include: (a) Call for periodical reports from the body corporate, i.e., issuer of debentures. (b) Take possession of trust property in accordance with the provisions of the trust deed. (c) Enforce security in the interest of the debenture holders.

Can a company issue unsecured debentures?

Yes. Pursuant to Section 71 of the Companies Act, 2013, a Private Limited Company can issue unsecured debentures with an option to convert such debentures into shares, either in whole or in part at the time of redemption.

What are the different types of debentures?

Companies use debentures when they need to borrow the money at a fixed rate of interest for its expansion. Secured and Unsecured, Registered and Bearer, Convertible and Non-Convertible, First and Second are four types of Debentures. Let us learn more about Debentures in detail.

Are debentures current liabilities?

Noncurrent liabilities include debentures, long-term loans, bonds payable, deferred tax liabilities, long-term lease obligations, and pension benefit obligations. The portion of a bond liability that will not be paid within the upcoming year is classified as a noncurrent liability.