The matter has been examined in the Ministry  in consultation with Reserve Bank of India. Debentures – Companies Act, 2013. arunak Companies Act 2013, Company Law March 15, 2020 (Section 71) Debentures (1) ... the procedure for the debenture-holders to inspect the trust deed and to obtain copies thereof, quantum of debenture redemption reserve … Section 71 of Companies Act 2013: Debentures. (f) ensure that the company does not commit any breach of the terms of issue of debentures or covenants of the trust deed and take such reasonable steps as may be necessary to remedy any such breach; (g) inform the debenture holders immediately of any breach of the terms of issue of debentures or covenants of the trust deed; (h) ensure the implementation of the conditions regarding creation of security for the debentures, if any, and debenture redemption reserve; (i) ensure that the assets of the company issuing debentures and of the guarantors, if any, are sufficient to discharge the interest and principal amount at all times and that such assets are free from any other encumbrances except those which are specifically agreed to by the debenture holders; (j) do such acts as are necessary in the event the security becomes enforceable; (k) call for reports on the utilization of funds raised by the issue of debentures-. (12) A contract with the company to take up and pay for any debentures of the company may be enforced by a decree for specific performance. No spam. Currently, a company is required to create a Debenture Redemption Reserve (DRR) for the purpose of redemption of debentures as per conditions prescribed in the Rules. (d) the amount credited to Debenture Redemption Reserve shall not be utilized by the company except for the purpose of redemption of debentures. 1. [Effective from 1st April, 2014, except sub-sections (9) to (11) which is effective from 1st June, 2016]. Substituted by the Notification Companies (Share Capital and Debentures) Third Amendment Rules, 2016 Dated 19th July, 2016. In rule 18, in sub-rule (7), in clause (b), in sub-clause (ii) and (iii) for the words "of the value of debentures" wherever they occur, the words "of the value of outstanding debentures" shall be substituted; 11. [13] Substituted by the Companies (Share Capital and Debentures) Amendment Rules,2019 vide Notification No. (i) beneficially holds shares in the company; (ii) is a promoter, director or key managerial personnel or any other officer or an employee of the company or its holding, subsidiary or associate company; (iii) is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee; (iv) is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company; (v) has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon; (vi) has any pecuniary relationship with the company amounting to two per cent. "], (c) every company required to create Debenture Redemption Reserve shall on or before the 30 th day of April in each year, invest or deposit, as the case may be, a sum which shall not be less than fifteen percent, of the amount of its debentures maturing d uring the year ending on the 31 st day of March of the next year, in any one or more of the following methods, namely:-. of the value of the outstanding debentures; 14[(v) In case a company is covered in item (A) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), it shall on or before the 30th day of April in each year, in respect of debentures issued by such a company, invest or deposit, as the case may be, a sum which shall not be less than fifteen percent., of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year in any one or more methods of investments or deposits as provided in sub-clause (vi): Provided that the amount remaining invested or deposited, as the case may be, shall not any time fall below fifteen percent. Rights. ", the following proviso shall be substituted, namely:-. of the value of the outstanding debentures; (v) In case a company is covered in item (A) or item (B) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), it shall on or before the 30th day of April in each year, in respect of debentures issued by a company covered in item (A) or item (B) of sub-clause (iii) of clause (b) or item (B) of sub-clause (iv) of clause (b), invest or deposit, as the case may be, a sum which shall not be less than fifteen per cent., of the amount of its debentures maturing during the year, ending on the 3l't day of March of the next year in any one or more methods of investments or deposits as provided in sub-clause (vi): Provided that the amount remaining invested or deposited, as the case may be, shall not at any time fall below fifteen percent. the following sub-clause shall be substituted, namely.- (i) beneficially holds shares in the company; (ii) is a promoter, director or key managerial personnel or any other officer or an employee of the company or its holding, subsidiary or associate company; (iii) is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee; (iv) is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company; (v) has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon; (vi) has any pecuniary relationship with the company amounting to two per cent. It is, accordingly, clarified that unless otherwise provided in the circular/ directions/ regulations issued by Reserve Bank of India, provisions of Chapter III of the Act and rule 18 of Companies (Share Capital and Debenture) Rules, 2014 would not apply to issue of rupee denominated bonds made exclusively to persons resident outside India in accordance with applicable sectoral regulatory provisions as stated above. S.O. GSR 210 (E) dated 18th March, 2015. (6) A debenture trustee shall take steps to protect the interests of the debenture-holders and redress their grievances in accordance with such rules as may be prescribed. (a) requisition in writing signed by debenture holders holding at least one-tenth in value of the debentures for the time being outstanding; (b) the happening of any event, which constitutes a breach, default or which in the opinion of the debenture trustees affects the interest of the debenture holders. (i) Companies engaged in setting up of infrastructure projects; (ii) ‘Infrastructure Finance Companies’ as defined in clause (viia) of sub-direction (1) of direction 2 of Non-Banking Financial (Non-deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; [2] [(iii) Infrastructure Debt Fund Non-Banking financial Companies, as defined in clause (b) of direction 3 of Infrastructure Debt fund Non-Banking Financial Companies (Reserve Bank) Directions, 2011; (iv) Companies permitted by a Ministry or Department of the Central Government or by Reserve Bank of India or by the National Housing Bank or by any other statutory authority to issue debentures for a period exceeding ten years], (b) [“Such an issue of debentures shall be secured by the creation of a charge on the properties or assets of the company or its subsidiaries or its holding company or its associates companies, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon;”][8], (c) the company shall appoint a debenture trustee before the issue of prospectus or letter of offer for subscription of its debentures and not later than sixty days after the allotment of the debentures, execute a debenture trust deed to protect the interest of the debenture holders; and, (d) the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on—, [9][(i) [any specific movable property of the company or its holding company or subsidiaries or associate companies or otherwise. Special Measures under Companies Act, 2013 (CA-2013) and Limited Liability Partnership Act, 2008 in view of COVID-19 outbreak. (B) in unencumbered securities of the Central methods of deposits or from any charge or lien; Government or any State Government; (C) in unencumbered securities mentioned in sub-clause (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882; (D) in unencumbered bonds issued by any other company which is notified under sub-clause (f) of section 20 of the Indian Trusts Act, 1882 : Provided that the amount invested or deDosited as above shall not be used for any purpose other than for redemption of debentures maturing during the year referred above. [7] Inserted by Companies (Share Capital and Debentures) Amendment Rules, 2015 vide Notification No. Things to keep in mind while issuing debentures: – 1. Prior to substitution it read as under: ” such an issue of debentures shall be secured by the creation of a charge, on the properties or assets of the company, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon.”. [13] [(7) The company shall comply with the requirements with regard to Debenture Redemption Reserve (DRR) and investment or deposit of sum in respect of debentures maturing during the year ending on the 31st day of March of next year, in accordance with the conditions given below:-. For other Financial Institutions (FIs) within the meaning of clause (72) of section 2 of the Companies Act, 2013, DRR will be as applicable to NBFCs registered with RBI. (A) for NBFCs registered with RBI under section 45-IA of the Reserve Bank of India Act, 1934 and for Housing Finance Companies registered with National Housing Bank, Debenture Redemption Reserve is not required in case of privately placed debentures. 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