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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Under Section 71 of the Companies Act, 2013, what must a company do before making an offer or invitation to the public or to more than five hundred members for subscription of its debentures?

The company must appoint one or more debenture trustees before the issue or offer. Section 71(5) bars a prospectus or an offer to the public, or to over five hundred members, for debentures unless trustees have already been appointed on the prescribed conditions.

  1. AObtain a court decree for specific performance
  2. BCreate a Capital Redemption Reserve
  3. CAppoint one or more debenture trusteesCorrect
  4. DConvert all debentures into equity shares

Explanation

Section 71(5) provides that no company shall issue a prospectus or make such an offer exceeding five hundred members unless it has first appointed one or more debenture trustees. The Capital Redemption Reserve relates to preference shares under Section 55, and conversion is optional, not mandatory.

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