Quick Answer: Is Appointment Of Debenture Trustee Compulsory?

Who is debenture trustee?

A debenture trustee is a person or entity that serves as the holder of debenture stock for the benefit of another party.

A debenture trustee is a person or entity that serves as the holder of debenture stock for the benefit of another party..

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 …

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.

Can debentures be issued without interest?

Zero Rates of Interest Debentures: Company can issue this type of debenture, Rate of interest in these debentures will be zero. … As stated in section 71(4) the company shall create a debenture redemption reserve account out of the profits of the company available for payment of dividend.

Who can become debenture trustee?

Who can be appointed a Debenture Trustee? To act as debenture trustee, the entity should either be a scheduled bank carrying on commercial activity, a public financial institution, an insurance company, or a body corporate. The entity should be registered with SEBI to act as a debenture trustee.

How many debentures can be issued?

A company cannot issue debentures to more than 500 people without appointing a debenture trustee, whose duty would be to protect the interest of Debenture Holders and redress their grievances.

Is debenture a loan?

In the United States, a debenture is a loan that is backed by the full faith and credit of the issuer. This means that, in the US at least, a debenture is a type of Unsecured Loan, with the high creditworthiness of the borrower prompting the lender to make the loan.

What are the rights of debenture holders?

Debenture holders have no rights to vote in the company’s general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company’s financial statements.

What does a debenture mean?

A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.

Why is Debenture Trustee required?

The concept of debenture trustees was evolved due to the difficulties being faced by an issuer company while dealing with each debenture holder separately for obtaining their consent on various matters and carrying out compliances, when the debentures were issued to multiple debenture holders.

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.

What are the different types of debentures?

Types of Debentures: 7 Major Types of DebenturesDebentures may be of the following kinds: ADVERTISEMENTS:i. Registered Debentures: … ii. Bearer Debentures: … iii. Redeemable Debentures: … iv. Perpetual or Irredeemable Debentures: … v. Secured Debentures: … vi. Naked Debentures: … vii. Debentures Issued as Collateral Security for a Loan:More items…

What is a debenture certificate?

Debentures are instruments of debt, which means that debenture holders become creditors of the company. They are a certificate of debt, with the date of redemption and amount of repayment mentioned on it. This certificate is issued under the company seal and is known as a Debenture Deed.

What are secured debentures?

Secured debentures meaning: bonds that are issued with collateral. The party issuing the bond offers a piece of property or other assets to states and bondholders along with signed permission for those entities to take possession of the collateral if the issuer doesn’t repay the debt.

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. In order to raise funds from the general public, companies can create security in the form of shares known as debenture stock.