CS Executive · Company Law and Practice · Debt Instruments - Concepts
Kaveri Foods Ltd wishes to issue debentures that the holder may convert, wholly or partly, into equity shares at the time of redemption. What approval does the Act require for such an issue?
Debentures carrying an option to convert into shares, wholly or partly, require approval by a special resolution passed at a general meeting. This is the proviso to Section 71(1); an ordinary resolution or a mere Board decision does not satisfy it.
- AAn ordinary resolution at a general meeting
- BA special resolution passed at a general meetingCorrect
- CA Board resolution by circulation only
- DPrior approval of the Tribunal
Explanation
Section 71(1) permits issue of debentures with an option to convert them into shares, wholly or partly, at redemption. The proviso requires that such an issue be approved by a special resolution passed at a general meeting. An ordinary resolution is insufficient.
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