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CS Executive · Company Law and Practice · Debt Instruments - Concepts

Godavari Power Ltd wants to issue debentures that the holder may convert into equity shares, wholly or partly, at the time of redemption. Which approval does the Companies Act, 2013 require for such an issue?

The issue must be approved by a special resolution passed at a general meeting. Section 71(1) allows debentures convertible into shares wholly or partly at redemption, and its proviso requires that special resolution; an ordinary resolution or Board approval alone is not enough.

  1. AAn ordinary resolution at a general meeting
  2. BA special resolution passed at a general meetingCorrect
  3. CA Board resolution by circulation only
  4. DPrior approval of the Tribunal

Explanation

The proviso to Section 71(1) requires that issue of debentures with an option to convert them into shares, wholly or partly, be approved by a special resolution passed at a general meeting. An ordinary resolution is insufficient.

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