Question

State the provision for the issue of debentures? 

Answer 1

1. A joint-stock company can issue debentures at any time.
2. Debentures can be issued by a public company as well as by private company. Private company after securing a certificate of incorporation can issue debentures. A public company has to obtain a Trading Certificate for the issue of Debentures.
3. As per section 292(1), the Board of Directors has the power to issue debentures. The power must be exercised by means of a resolution passed in the Board Meeting.
4. A company cannot borrow money exceeding the aggregate of the paid capital of the company and its free reserves. As per section 293 (1), the Act empowers the Board of Directors to raise excess money with the consent of members in general meetings. The Articles of Association should specify the maximum amount that the company can borrow.
5. According to the Companies Act, the company cannot issue debentures carrying voting rights.
6. Debentures can be issued at par or at a premium or even at a discount. They may be issued through a prospectus or private arrangements.
7. Companies (Amendment) Act, 2000 prohibits the issue of unsecured debentures. Now companies can issue only secured debentures.