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CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts

A company offers its debentures by prospectus to the public. Under Section 71 as reproduced, which step must it complete before the issue or offer?

Before issuing a prospectus or inviting the public, or more than five hundred members, to subscribe for debentures, the company must appoint one or more debenture trustees. Section 71 makes this a precondition to the offer.

  1. AObtain a credit rating from the Tribunal
  2. BAppoint one or more debenture trusteesCorrect
  3. CTransfer the entire amount to the debenture redemption reserve
  4. DObtain the consent of three-fourths of equity shareholders

Explanation

Section 71(5) says no company shall issue a prospectus or make an offer or invitation to the public, or to its members exceeding five hundred, for subscription of debentures unless it has before the issue appointed one or more debenture trustees. The other steps are not required by this section.

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