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CS Executive · Corporate Accounting and Financial Management · Accounting for Debentures

Under the Companies Act, 2013 as stated in the text, which statement about debentures is correct?

Debentures with an option to convert into shares, wholly or partly, may be issued only if approved by a special resolution at a general meeting. Voting rights on debentures are prohibited, and the debenture redemption reserve cannot be used except for redemption.

  1. AA company may issue debentures carrying voting rights if the articles permit
  2. BIssue of debentures convertible into shares wholly or partly needs approval by a special resolution at a general meetingCorrect
  3. CDebenture redemption reserve may be freely used for paying dividends
  4. DDebentures can never be issued with an option to convert into shares

Explanation

Section 71(1) allows convertible debentures but requires a special resolution passed at a general meeting. Section 71(2) bars voting rights, and the reserve under 71(4) can be used only for redemption.

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