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

Under Section 71 as reproduced, a debenture trustee concludes that the company's assets are insufficient or likely to become insufficient to discharge the principal when due. What may the trustee do?

The debenture trustee may file a petition before the Tribunal. After hearing the company and interested persons, the Tribunal may impose such restrictions on the company incurring further liabilities as it thinks necessary to protect the debenture-holders.

  1. ASell the company's assets without any order
  2. BFile a petition before the Tribunal, which may restrict incurring of further liabilities by the companyCorrect
  3. CReduce the interest rate on the debentures
  4. DCancel the debentures and refund the holders from the DRR

Explanation

Section 71(9) allows the debenture trustee to petition the Tribunal, which after hearing may impose restrictions on incurring further liabilities as it considers necessary in the interests of debenture-holders. The trustee has no power to sell assets or alter interest unilaterally under this provision.

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