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CA Intermediate · Corporate and Other Laws · Share Capital and Debentures

Meridian Steel Ltd, a listed company, issued 10,000 secured debentures of Rs 1,000 each, raising Rs 1 crore, and a debenture trust deed was executed. The company defaults in repaying debentures at maturity. The debenture trustee wants to move against the company. Which statement is correct under the Companies Act, 2013?

On default in redemption of debentures or payment of interest, the Tribunal can, on application by debenture holders or the trustee, direct the company to redeem the debentures immediately by repayment. The order is enforceable as a decree.

  1. AThe Tribunal may, on application by the trustee, direct the company to redeem the debentures immediately, with the order enforceable like a decreeCorrect
  2. BThe trustee must wait three years after maturity before taking any action
  3. CThe trustee can sell the company's assets without any approval
  4. DThe Tribunal can only direct payment of interest, not redemption

Explanation

Where a company fails to redeem debentures on the due date or pay interest, the Tribunal may, on application by any or all debenture holders, direct the company to redeem the debentures immediately by repayment. The Tribunal may direct this despite the contract saying redemption is deferred. The Tribunal's order can be enforced as a decree. The other options misstate the trustee's rights, because no waiting period or unilateral sale is provided.

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