Skip to content

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

Meera Textiles Ltd proposes to issue debentures that give holders the right to convert them wholly or partly into equity shares at the time of redemption. Under the Companies Act, 2013, what approval is needed for such an issue?

A special resolution passed at a general meeting is required. Section 71(1) permits debentures convertible into shares wholly or partly at redemption, but only if the issue is approved by a special resolution, so an ordinary resolution or a Board resolution alone does not suffice.

  1. AA special resolution passed at a general meetingCorrect
  2. BAn ordinary resolution passed at a general meeting
  3. CA Board resolution passed by circulation only
  4. DPrior approval of the Registrar of Companies

Explanation

Section 71(1) allows debentures with an option to convert into shares, wholly or partly, at redemption, but the proviso requires approval by a special resolution at a general meeting. An ordinary resolution is insufficient because the Act specifically prescribes a special resolution.

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