CS Executive · Company Law and Practice · Debt Instruments - Concepts
Kaveri Foods Ltd plans to issue debentures carrying one vote per debenture at general meetings, to attract lenders who want a say in management. Which statement is correct under the Companies Act, 2013?
Such an issue is not permitted. Section 71(2) states that no company shall issue any debentures carrying any voting rights, and this prohibition applies regardless of the articles, a special resolution or whether the debentures are secured.
- APermitted if the articles so provide
- BPermitted if approved by a special resolution
- CNot permitted, as no company can issue debentures carrying voting rightsCorrect
- DPermitted for secured debentures only
Explanation
Section 71(2) says no company shall issue any debentures carrying any voting rights. Neither the articles nor a special resolution nor security can override this bar.
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