Skip to content

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

Kaveri Foods Ltd wishes to issue debentures that the holder can opt to convert wholly or partly into equity shares at the time of redemption. What does the Companies Act, 2013 require for such an issue?

Such an issue needs approval by a special resolution passed at a general meeting. Section 71(1) permits debentures convertible into shares wholly or partly at redemption, but its proviso makes the special resolution mandatory; a Board or ordinary resolution is not enough.

  1. AApproval by a special resolution passed at a general meetingCorrect
  2. BApproval by an ordinary resolution at a general meeting
  3. COnly a Board resolution, as it is a borrowing matter
  4. DPrior approval of the Tribunal

Explanation

Section 71(1) allows debentures with an option to convert into shares, wholly or partly, at the time of redemption, but the proviso requires approval by a special resolution at a general meeting. An ordinary resolution or Board resolution alone is insufficient, and no Tribunal approval is prescribed.

Did you get it right without looking?

One question tells you little. A timed set on Debt Instruments - Concepts shows your real accuracy, how long you take and where you lose marks.

Practise Debt Instruments - ConceptsFree diagnostic mock

More Debt Instruments - Concepts questions