CSEET · Fundamentals of Accounting · Introduction to Company Accounts
Under Section 71 of the Companies Act, 2013, which of the following is true about debentures issued by a company?
No company may issue debentures carrying voting rights. Section 71(2) of the Companies Act, 2013 prohibits this outright, with no exception for articles, special resolutions or secured debentures, because debenture-holders are creditors of the company and not its members.
- ADebentures may carry voting rights if the articles permit
- BNo company shall issue any debentures carrying any voting rightsCorrect
- CDebentures can carry voting rights only on a special resolution
- DDebentures carry voting rights only if they are secured
Explanation
Section 71(2) states plainly that no company shall issue any debentures carrying any voting rights. Neither articles, a special resolution nor security changes this. Debenture-holders are creditors, not members.
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