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CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts

Under Section 71 as reproduced, a company fails to redeem its debentures on maturity. Which remedy is available to debenture-holders?

The Tribunal may, on application by any or all debenture-holders or the debenture trustee, order the company to redeem the debentures forthwith by paying the principal and interest due. The Act gives no automatic conversion or board-removal remedy.

  1. AThe Tribunal may, on application of any or all debenture-holders or the trustee, direct the company to redeem forthwith by paying principal and interest dueCorrect
  2. BThe debenture-holders may vote out the Board at once
  3. CThe debentures automatically convert into equity shares
  4. DThe company is allowed to issue fresh debentures to cover the default without any approval

Explanation

Section 71(10) lets the Tribunal, on application of any or all of the debenture-holders or the debenture trustee, and after hearing the parties, direct the company by order to redeem the debentures forthwith on payment of principal and interest due. The Section contains no automatic conversion or voting remedy.

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