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

Meera holds debentures of Kaveri Foods Ltd. She wishes to sell them to Arjun. Under the Companies Act, 2013, how are the debentures treated and how are they transferable?

Debentures are movable property transferable in the manner provided by the articles of the company. Section 44 of the Companies Act, 2013 lays this down, so the transfer must follow the articles' procedure, and it is neither immovable property nor freely transferable irrespective of the articles.

  1. AAs immovable property, transferable by registered deed only
  2. BAs movable property, transferable in the manner provided by the articles of the companyCorrect
  3. CAs movable property, freely transferable regardless of the articles
  4. DAs a personal right, not transferable without the Tribunal's order

Explanation

Section 44 provides that shares or debentures or other interest of any member are movable property transferable in the manner provided by the articles. Option C ignores the articles; option A misclassifies the property.

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