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

Which statement about conversion of debentures into shares at the time of redemption is correct as per the section 71 text provided?

The issue of debentures with an option to convert them wholly or partly into shares at redemption must be approved by a special resolution passed at a general meeting. Debentures cannot carry voting rights, and the provision is not restricted to secured debentures.

  1. AConversion needs no approval from members
  2. BDebentures carrying an option to convert require approval by a special resolution passed at a general meetingCorrect
  3. CDebentures with conversion option may carry voting rights
  4. DConversion is allowed only for secured debentures

Explanation

Section 71(1) allows issue of debentures with an option to convert them into shares, wholly or partly, at redemption, provided a special resolution is passed at a general meeting. Section 71(2) bars debentures carrying voting rights, so the voting option is wrong.

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