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

Under the Companies Act, 2013 as reproduced in the official text, which statement about debentures issued by a company is correct?

A company may issue debentures convertible into shares, wholly or partly, at redemption, but the issue must be approved by a special resolution at a general meeting. Debentures can never carry voting rights, and a Board resolution alone is insufficient.

  1. AA company may issue debentures carrying voting rights if the articles permit
  2. BA company may issue debentures with an option to convert them into shares wholly or partly at redemption, but this needs approval by a special resolution at a general meetingCorrect
  3. CDebentures convertible into shares can be issued by a Board resolution alone
  4. DA company cannot issue debentures that are convertible into shares at all

Explanation

Section 71(1) permits debentures with an option to convert into shares, wholly or partly, at the time of redemption, and its proviso requires a special resolution passed at a general meeting. Section 71(2) bars voting rights on debentures, so the first option is wrong. A Board resolution alone is not enough.

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