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

The debenture trust deed of Orion Power Ltd is being revised. The debenture trustee wants some exemptions from liability to be validly agreed. Under the proviso to Section 71(7), which condition must be met?

Exemptions must be agreed by a majority of debenture-holders holding not less than three-fourths in value of the total debentures, at a meeting held for the purpose. A simple majority of those present, a members' resolution or a Tribunal order does not satisfy the proviso.

  1. AA simple majority of debenture-holders present and voting at any meeting
  2. BMajority of debenture-holders holding not less than three-fourths in value of the total debentures, at a meeting held for the purposeCorrect
  3. CApproval of the company's members by ordinary resolution
  4. DOrder of the Tribunal on application by the trustee

Explanation

The proviso to Section 71(7) subjects the trustee's liability to such exemptions as may be agreed by a majority of debenture-holders holding not less than three-fourths in value of the total debentures, at a meeting held for that purpose. A simple majority of those present, or a members' resolution, does not meet this test, and no Tribunal order is required.

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