What are Redeemable debentures?
Redeemable debentures are those securities which are to be repaid within a stipulated period / maturity period. For instance, X co issued 9% 7 years $ 1000 Debentures. This issue of debentures has coupon rate of 9% per year and redeemable period of 7 years. The amount raised by issuing thses debentures are to be repaid within 7 years from now.
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A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different f…rom stocks and bonds, although all three are types of investment. Below are descriptions of the different types of investment options for small investors and entrepreneurs. Debentures and Shares When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get. Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income. (MORE)
Answer . i think debenture could be bought in an environment where debt securities are traded from private companies usually more than a year and with a fixed interest rate.
A debunture is an unsecured loan certificate issued by a company,backed by general credit rather than by specified assets. A bond isa debt investment in which an investor loans money to an entitythat borrows the funds at a fixed interest rate.
No, debenture holders are not owners of the company. They are one of the lenders in the company, and are entitled to interest.
What is a Debenture? A Debenture is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrumen…t and repays the principal normally, unless otherwise agreed, on maturity. These are long-term debt instruments issued by private sector companies. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. Long maturity debentures are rarely issued, as investors are not comfortable with such maturities Debentures enable investors to reap the dual benefits of adequate security and good returns. Unlike other fixed income instruments such as Fixed Deposits, Bank Deposits they can be transferred from one party to another by using transfer from. Debentures are normally issued in physical form. However, corporates/PSUs have started issuing debentures in Demat form. Generally, debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. Debentures can be secured or unsecured. What are the different types of debentures? Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: Â· Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares Â· Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription. Â· Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company. Â· Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. On basis of Security, debentures are classified into: Â· Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. So if the issuer fails on payment of either the principal or interest amount, his assets can be sold to repay the liability to the investors Â· Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount, the investor has to be along with other unsecured creditors of the company. (MORE)
SHARES- 1.share holder is the real owner of the company.share holder have not fixed dividend rate.share holder have not maturity period.share are not redeemed.shares are more volatile.share holder have high risk.share holder have high return.share holder have right on residial income. DEBENTURE-1.…debenture holder is the creditor of a company.they have fixed rate of interest.they have a maturity period.they dont have right to vote.debentures are redeemed.they are not volatile.they have no risk.they have low return. (MORE)
Redeemers were the members of the powerful conservative southernoligarchy. The redeemers had limited the rights of African Americanby passing laws that discriminated against them.
It is a formal legal document/contract that outlines the terms of the debenture issue between issuer and holders. States concerns to maturity date, interest rate, interest payment , protective provisions and any other terms & conditions between issuer & holders....
Debentures hold greater risk because the company could eventually go out of the business. so this type of investment should be done very carefully.
Debentures function more or less like bonds. One can also term debentures as a variant of bonds. Debentures are issued by a company which offers to pay interest in lieu of the money borrowed for a pre-specified period. In essence, it represents a loan taken by the issuer who pays an agreed rate of i…nterest throughout the life of the instrument and repays the principal normally, unless otherwise agreed, on maturity. Bonds on the other hand are more secured than debenture. As a debenture holder, you provide unsecured loan (most of the times debentures are unsecured in nature) to the company. Debentures carry a higher rate of interest as the company does not offer any collateral to you for your money. For this reason bond holders receive a lower rate of interest but are more secure in nature. (MORE)
A debenture is a debt security, like a bond is, but unlike a bond a debenture is unsecured.\n. \nHowever, the two terms are basically interchangeable--a lot of people call bonds debentures and debentures bonds.
When debentures are redeemed out of capital, no transfer is made to general reserve or debenture redemption reserve account. In this method it is assumed that the company has sufficient funds to redeem the debentures. So the profits are not utilised to replace the debentures.It affects adversely to …the Working Capital of the company. (MORE)
Debenture is a debt instrument to raise funds. It has a maturity period associated with it. At the end of the maturity, the company(borrower) should return the interest and principal amount. Debenture Redemption Reserve is an amount kept as reserve for paying the debenture holder at the end of the… maturity period. (MORE)
If for example a company obtains a secured loan or overdraft facility from its bank, the latter is likely to insist that the company seals the banks standard form of debenture creating the charge and giving the bank various safeguards and powers
an unsecured loan certificate issued by a company, backed by general credit rather than by specified assets.
Long-term debt securities issued by the Government or any of the State Government's or undertakings owned by them or by development financial institutions are called as bonds. Instruments issued by other entities are called debentures. The difference between the two is actually a function of where t…hey are registered and pay stamp duty and how they trade. reference: http://www.fimmda.org/useful_links/faq.asp#p3 (MORE)
A debenture is basically an unsecured loan to a corporation. Often there is a provision to exchange this debt for corporate stock. Non-convertible debentures do not have this provision. Non Convertible Debentures are relatively safer than stocks. In case the company winds up, claims of NCD holders… will be superior to those holding other unsecured assets of the company such as stocks etc. In fact NCDs can be considered to be safer than Company Fixed Deposits as well. (MORE)
debentures are a form of unsecured debt that is in the form of a bond. This type of debt is normally used by corporations for funding. A share is just a percentage of a company that you own through purchasing a share of stock of a company.
The word redeem is a verb (redeem, redeems, redeeming, redeemed): . to recover ownership by paying amount due. . to pay off such as a promissory note. . to convert to cash. . to turn in to receive something in return. . to set free, to rescue, to ransom. . to save from sinfulness and its con…sequences. . to make up for, make amends for. . to restore honor or reputation. (MORE)
Capital refers to the amount invested in the company so that it can carry on its activities. In a company capital refers to "share capital". The capital clause in Memorandum of Association must state the amount of capital with which company is registered giving details of number of shares and the ty…pe of shares of the company. A company cannot issue share capital in excess of the limit specified in the Capital clause without altering the capital clause of the MA. The following different terms are used to denote different aspects of share capital:- 1. Nominal, authorised or registered capital means the sum mentioned in the capital clause of Memorandum of Association. It is the maximum amount which the company raise by issuing the shares and on which the registration fee is paid. This limit is cannot be exceeded unless the Memorandum of Association is altered. 2. Issued capital means that part of the authorised capital which has been offered for subscription to members and includes shares alloted to members for consideration in kind also. 3. Subscribed capital means that part of the issued capital at nominal or face value which has been subscribed or taken up by purchaser of shares in the company and which has been alloted. 4. Called-up capital means the total amount of called up capital on the shares issued and subscribed by the shareholders on capital account. I.e if the face value of a share is Rs. 10/- but the company requires only Rs. 2/- at present, it may call only Rs. 2/- now and the balance Rs.8/- at a later date. Rs. 2/- is the called up share capital and Rs. 8/- is the uncalled share capital. 5. Paid-up capital means the total amount of called up share capital which is actually paid to the company by the members. In India, there is the concept of par value of shares. Par value of shares means the face value of the shares. A share under the Companies act, can either of Rs10 or Rs100 or any other value which may be the fixed by the Memorandum of Association of the company. When the shares are issued at the price which is higher than the par value say, for example Par value is Rs10 and it is issued at Rs15 then Rs5 is the premium amount i.e, Rs10 is the par value of the shares and Rs5 is the premium. Similarily when a share is issued at an amount lower than the par value, say Rs8, in that case Rs2 is discount on shares and Rs10 will be par value. Types of shares : Shares in the company may be similar i.e they may carry the same rights and liabilities and confer on their holders the same rights, liabilities and duties. There are two types of shares under Indian Company Law :- 1. Equity shares means that part of the share capital of the company which are not preference shares. 2. Preference Shares means shares which fulfill the following 2 conditions. Therefore, a share which is does not fulfill both these conditions is an equity share. . It carries Preferential rights in respect of Dividend at fixed amount or at fixed rate i.e. dividend payable is payable on fixed figure or percent and this dividend must paid before the holders of the equity shares can be paid dividend. . It also carries preferential right in regard to payment of capital on winding up or otherwise. It means the amount paid on preference share must be paid back to preference shareholders before anything in paid to the equity shareholders. In other words, preference share capital has priority both in repayment of dividend as well as capital. Types of Preference Shares 1. Cumulative or Non-cumulative : A non-cumulative or simple preference shares gives right to fixed percentage dividend of profit of each year. In case no dividend thereon is declared in any year because of absence of profit, the holders of preference shares get nothing nor can they claim unpaid dividend in the subsequent year or years in respect of that year. Cumulative preference shares however give the right to the preference shareholders to demand the unpaid dividend in any year during the subsequent year or years when the profits are available for distribution . In this case dividends which are not paid in any year are accumulated and are paid out when the profits are available. 2. Redeemable and Non- Redeemable : Redeemable Preference shares are preference shares which have to be repaid by the company after the term of which for which the preference shares have been issued. Irredeemable Preference shares means preference shares need not repaid by the company except on winding up of the company. However, under the Indian Companies Act, a company cannot issue irredeemable preference shares. In fact, a company limited by shares cannot issue preference shares which are redeemable after more than 10 years from the date of issue. In other words the maximum tenure of preference shares is 10 years. If a company is unable to redeem any preference shares within the specified period, it may, with consent of the Company Law Board, issue further redeemable preference shares equal to redeem the old preference shares including dividend thereon. A company can issue the preference shares which from the very beginning are redeemable on a fixed date or after certain period of time not exceeding 10 years provided it comprises of following conditions :- . It must be authorised by the articles of association to make such an issue. . The shares will be only redeemable if they are fully paid up. . The shares may be redeemed out of profits of the company which otherwise would be available for dividends or out of proceeds of new issue of shares made for the purpose of redeem shares. . If there is premium payable on redemption it must have provided out of profits or out of shares premium account before the shares are redeemed. . When shares are redeemed out of profits a sum equal to nominal amount of shares redeemed is to be transferred out of profits to the capital redemption reserve account. This amount should then be utilised for the purpose of redemption of redeemable preference shares. This reserve can be used to issue of fully paid bonus shares to the members of the company. 3. Participating Preference Share or non-participating preference shares : Participating Preference shares are entitled to a preferential dividend at a fixed rate with the right to participate further in the profits either along with or after payment of certain rate of dividend on equity shares. A non-participating share is one which does not such right to participate in the profits of the company after the dividend and capital have been paid to the preference shareholders. Alternation of capital A company limited by shares can alter the capital clause of its Memorandum in any of the following ways provided that such alteration is authorised by the articles of association of the company :- . Increase in share capital by such amount as it thinks expedient by issuing new shares. . Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares. eg, if the company has 100 shares of Rs.10 each ( aggregating to Rs. 1000/-) it may consolidate those shares into 10 shares of Rs100 each. . Convert all or any of its fully paid shares into stock and re-convert stock into fully paid shares of any denomination. . Subdivide shares or any of shares into smaller amounts fixed by the Memorandum so that in subdivision the proportion between the amount paid and the amount if any unpaid on each reduced shares shall be same as it was in case of from which the reduced share is derived. . Cancel shares which have been not been taken or agreed to be taken by any person and diminish the amount of share capital by the amount of the shares so cancelled. The alteration of the capital of the company in any of the manner specified above can be done by passing a resolution at the general meeting of the company and does not require any confirmation by the court. Reduction of the share capital can be effected only in the manners specified in Section 100-104 of the Act or by way of buy back under Section 77A and 77B of the Act. Notice of alteration to share capital is required to be filed with the registrar of the company in Form no 5 within 30 days of the alteration of the capital clause of the MA. The Registrar shall record the notice and make necessary alteration in Memorandum and Articles of Association of the company. Any default in giving notice to the registrar renders company and its officers in default liable to punishment with fine which may extend to the Rs50 for each day of default. Conversion of shares into stocks : Conversion of fully paid shares into stock may likewise be affected by the ordinary resolution of the company in the general meeting. Notice of the conversion must be given to the Registrar within 30 days of the conversion, the stock may be converted into fully paid shares following the same procedure and notice given to the Registrar in Form no 5. In this connection, the following provisions are important :- . Only fully paid shares can be converted into stocks . Direct issue of stock to members is not lawful and cannot be done. . The difference between shares and stock is that shares are transferable only in complete units so that transfer of half or any portion of share is not possible whereas stock is expressed in terms of any amount money and is transferable in any money fractions. . Articles may be give the Board of Directors authority to fix minimum amount of stock transferable. . Since stock is not divided into different units it is not required to be numbered. Shares on the other hand must be numbered. Reduction of share capital with sanction of the Court A company limited by the shares or a company limited by guarantee and having share capital can if authorised by its articles, by special resolution and subject to confirmation by the court on petition reduce its share capital. It may effect reduction of its share capital in any of following circumstances:- 1. Where the company is overcapitalised :- . It may extinguish or reduce the liability of member in respect of uncalled or unpaid capital. For example, where shares are of Rs100 each with Rs60 paid up, the company may reduce them to Rs60 fully paid and thus release the shareholder from the liability on uncalled capital of Rs. 40/-. . Pay off or return part of the unpaid capital not wanted for the purpose of the company. For example, where the shares are fully paid of Rs100 they may be reduced Rs40 each and Rs60 may be paid back to the shareholders. . Pay off part of the paid up share capital on the footing that it may be called up again. If shares are of Rs100 each the company may pay off Rs25 per share on condition that when desired the company may call it again without extinguishing the liability of shareholders to pay the uncalled share capital. . Reduce by a combination of the aforesaid methods . 2. Where has suffered loss of capital, in such situation the company can write off or cancel the share capital which has been lost or is unrepresented by available assets. Where the company has passed the resolution for reducing the share capital, it must, by petition, apply to the court in the prescribed form to the court for an order confirming the reduction. Where the proposed reduction of share capital involves the either diminution of liabilities in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital or in any other case if the court so directs the following provisions shall have effect :- . Every creditor of the company who on the date fixed by the court is entitled to debt from or any claim against the company shall be entitled to object to the reduction. . The Court shall settle a list of creditors so entitled to object and for that purpose shall ascertain as far as possible without requiring an application from any of the creditors, the names of creditors and the nature and amount of debt or claims and publish notices fixing the day or days within which creditors not entered in the list are to be entered if they so desire. . Where a creditor entered on the list whose debt or claim is not discharged or has not been determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of the creditors if the company secures payment of this debt or claim by appropriating the following amounts as the court may direct:- . The company admits the full amount claim or debt or though not admitting it is willing to provide for it, then the full amount of debt or claim . If the company does not admit and is not willing to provide for the full amount of debt or claim or if the amount is contingent or not ascertained, then amount fixed by the court after due enquiry. . Where the proposed reduction of share capital involves either diminution of any liability in respect of the unpaid share capital or payment of any shareholder of any paid share capital, the Court may, having regard to any special circumstances of the case as it thinks proper so to do, direct that the above provisions shall not apply to any class or classes of creditors. . If the court is satisfied with respect to every creditor of the company entitled to object to reduction that either his consent to the reduction has been obtained or his that debt or claim has been discharged or has been determined or has been secured, make an order confirming the reduction on such terms and conditions as it thinks fit. . Where the court makes such an order, it may, if for any special reasons thinks fit and proper to do so, make an order directing that the company shall shall during such period commencing on and any time after the date of the order as is specified in the order add to its name as the last words the words "& Reduced" and make an order requiring the company to publish the same along with the reasons for the reduction or such other information in regard thereto as the court may think expedient with view to giving proper information to the public and if the court thinks fit the causes which led to reduction. . Where the company is ordered to add to its name the words "& Reduced" those words shall until the expiry of period specified in the order shall be deemed to be part of the name of the company. . The registrar, on the production to him, of an order of the court confirming the reduction of the share capital of the company and on delivering to him the certified copy of the order and of minutes approved by the court showing with respect to the share capital of the company as altered by the order register the reduction of share capital. On registration of order and minutes, the reduction of share capital shall take effect. . Notice of the registration shall be published in such manner as the court may direct. Reduction of capital without the sanction of the court Reduction of capital can take place without the sanction of the court in the following cases . Buy back of shares in accordance to the provisions of Section 77A and 77B . Forfeiture of shares - A company may if authorised by its articles forfeit shares for non-payment of calls by the shareholders. Such proceedings amount to reduction of capital but the act does not require court sanction for this purpose. . Valid surrender of the shares - A company may accept the surrender of shares . Cancellation of capital - A company may cancel the shares which has not been taken up or agreed to be taken by the person and diminish the amount of its share capital. . Purchase of shares of member by the company under Section 402B. The Company Law Board may, on application made under Section 397 or Section 398, order the purchase of shares or interest of any member of the company by the company. These provisions come in force when a prescribed number of members make a complaint to the CLB for mis-management or oppression of the minority shareholders in the company. . Redemption of redeemable preference shares. Where redeemable preference shares are redeemed, it actually amounts to reduction of the capital. However, this does not require the sanction of the court. Buy-back of shares : B uy back of its own shares by a company is nothing but reduction of share capital. After the recent amendments in the Companies Act, 1956 buy back of its own shares by a company is allowed without sanction of the Court. It is nothing but a process which enables a company to go back to the holders of its shares and offer to purchase from them the shares that they hold. There are three main reasons why a company would opt for buy back :- . To improve shareholder value, since with fewer shares earning per share of the remaining shares will increase. . As a defense mechanism against hostile take-overs since there are fewer shares available for the hostile acquirer to acquire. . Public Signaling of the Management's Policy. A company may purchase its own shares or other specified securities out of :- . its free reserves; or . the securities premium account; or . the proceeds of any shares or other specified securities: No buy-back of any kind of shares or other specified securities can be made out of the earlier proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. No company can purchase its own shares or other specified securities unless :- . the buy-back is authorized by its articles; . a special resolution has been passed in general meeting of the company authorizing the buy-back; . the buy-back is of less than twenty five per cent of the total paid-up capital and free reserves of the company: . the buy-back of equity shares in any financial year shall not exceed twenty five per cent of its total paid-up equity capital in that financial year . the ratio of the debt owned by the company is not more than twice the capital and its free reserves after such buy-back. However, the Central Government may prescribe a higher ratio of the debt than that specified under this clause for a class or classes of companies. . all the shares or other specified securities for buy-back are fully paid-up; . the buy-back of the shares or other specified securities listed on any recognized stock exchange is in accordance with the regulations made by the Securities and Exchange Board of India in this behalf; . the buy-back in respect of shares or other specified securities other than those specified in clause (g) is in accordance with the guidelines as may be prescribed. The notice of the meeting at which special resolution is proposed to be passed shall be accompanied by an explanatory statement stating . a full and complete disclosure of all material facts . the necessity for the buy-back . the class of security intended to be purchased under the buy-back . the amount to be invested under the buy-back and . the time limit for completion of buy-back. Every buy-back must be completed within twelve months from the date of passing the special resolution. The buy-back may be :- . from the existing security holders on a proportionate basis; . from the open market or . from odd lots, that is to say, where the lot of securities of a listed public company whose shares are listed on a recognized stock exchange is smaller than such marketable lot as may be specified by the stock exchange; . by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity. Where a company has passed a special resolution to buy-back its own shares or other securities under this section, it shall, before making such buy-back, file with the Registrar and the Securities and Exchange Board of India a declaration of solvency in the form as may be prescribed and verified by an affidavit to the effect that the Board has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year of the date of declaration adopted by the Board, and signed by at least two directors of the company, one of whom shall be the managing director, if any: Such a declaration of solvency need not be filed with the Securities and Exchange Board of India by a company whose shares are not listed on any recognized stock exchange. Where a company buys back its own securities, it shall extinguish and physically destroy the securities so bought back within seven days of the last date of completion of buy-back. Where a company completes a buy-back of its shares or, other specified securities under this section, it shall not make further issue of the same kind of shares or other specified securities within a period of twenty four months except by way of bonus issue or in the discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or conversion of preference shares or debentures into equity shares. Where a company buys back its securities under this section it shall maintain a register of the securities so bought, the consideration paid for the securities bought-back, the date of cancellation of securities, the date of extinguishing and physically destroying of securities and such other particulars as may be prescribed. A company shall, after the completion of the buy-back under this section, file with the Registrar and the Securities and Exchange Board of India, a return containing such particulars relating to the buy-back within thirty days of such completion as may be prescribed. However such return need not be filed with the Securities and Exchange Board of India by a company whose shares are not listed on any recognized stock exchange. If a company makes default in complying with the provisions of this section or any rules or any regulations, the company or any officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. For the purposes of buy back, "specified securities" includes employees' stock option or other securities as may be notified by the Central Government from time to time; Where a company purchases its own shares out of free reserves, then a sum equal to the nominal value of the share so purchased shall be transferred to the capital redemption reserve account and details of such transfer shall be disclosed in the balance sheet." No company shall directly or indirectly purchase its own shares or other specified securities -. (a) through any subsidiary company including its own subsidiary companies; or (b) through any investment company or group of investment companies; or (c) if a default, by the company, in repayment of deposit or interest payable thereon, redemption of debentures, or preference shares or payment of dividend to any shareholder or repayment of any term loan or interest payable thereon to any financial institution or bank, is subsisting.. No Company can, directly or indirectly, purchase its own shares or other specified securities in case such company has not filed its annual returns with the Registrar of Companies, or has not paid the dividends declared by it within 42 days from the date of declaration or has not prepared its annual accounts in the prescribed manner. Variation of shareholders rights The rights, duties and liabilities of all shareholders are clearly defined at the time of issue of the shares. Once the rights of shareholders are fixed, they cannot be altered unless the provisions of the Companies Act for this purpose are complied with. The rights attached to the shares of any class can be varied only with the consent in writing of shareholders holding not less than 75 % of the issued shares of that class or with the sanction of special resolution passed at a separate meeting of the holders of issued shares of that class. However, the following conditions also must be complied with :- . The variation of rights are allowed by the Memorandum or Articles of Association of the Company. . In absence of such provision in the Memorandum or Articles of company, such variation must not be prohibited by the terms of issue of shares of that class. Rights of Dissenting Shareholders : T he rights of the shareholders who did not consent to or vote for variation of their rights are protected by the Companies Act. If the rights of any class of the shareholders are varied, the holders of not less than 10 per cent of the shares of that class, being persons who did not consent to or vote in favour of resolution for variation of their rights can apply to the court to have the variation cancelled. Where such application is made to the court, such variation will not be given effect unless and until it is confirmed by the court. Voting Rights of the Members Every member of a public company limited by shares holding equity shares will have votes in proportion to his share in paid up equity capital of the company. Generally, preference shareholders do not have any voting rights. However, they can vote on matters directly relating to the rights attached to the preference share capital. Any resolution for winding up of the company or for the reduction or repayment of the share capital shall be deemed to affect directly the rights attached to preference shares. Where the preference shares are cumulative (in respect of dividend) and the dividend thereon has remained unpaid for an aggregate period of two years before date of any meeting of the company, the preference shareholders will have right to vote on any resolution. In case of non-cumulative preference shares, preference shareholders have right to vote on every resolution if dividend due on their capital remains unpaid, either in respect of period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of aggregate period of not less than three years comprised in six years ending with the expiry of concerned financial year. Every equity shareholder has a right to vote at a general meeting. No company can prohibit any member from exercising his voting right any ground including the ground that he has not held his shares for a minimum period before he becomes eligible to vote. However, a member's voting rights can be revoked if that member does not make payment of calls or other sums due against him or where the company has exercised the right of lien on his shares. Further issue of the capital Rights Issue of Shares If, at any time after the expiry of 2 Years from the date of incorporation of the company or after one year from the date of first allotment of shares, whichever is earlier, a public company limited by shares issues further shares within the limit of authorised capital, its directors must first offer such shares to the existing holders of equity shares in proportion to the capital paid up on their shares at the time of further issue. This is commonly known as "Rights Issue of shares". The company must give notice each of the equity shareholders giving him the option to buy the shares offered to him. The shareholders must be informed of the number of shares he has the option to buy. He must be given at least 15 days to decide for exercising his option. The directors must state in the notice of the offer the fact that the shareholders also has the right to renounce the offer in whole or part in favour of some other person. This is commonly known as "Renunciation of Rights". If the shareholder does not inform the company of his decision to take the shares, it is deemed that he has declined the offer. In case where the rights shares are not taken by the shareholders, the directors of the company may dispose of the shares in the manner they think fit. A company may by special resolution in the general meeting decide that the directors need not offer the shares to the existing shareholders of the equity shares and that they may dispose them off in a manner thought fit by them. This is known as "preferential offer of shares" where third parties or only certain shareholders are given shares in priority over the other shareholders. However, if a special resolution for preferential issue of shares is not passed but merely an ordinary resolution is passed, preferential issue of shares may be done provided sanction of the Central Government is obtained. The price at which the preferential shares are to be offered are governed by the SEBI guidelines in case of listed companies. Such shares cannot be issued at a price which is less than the higher of the following :- . The average of the weekly highs and lows of the closing prices of the shares on the stock exchange during 6 months preceding the date of issue ; or . The average of the weekly highs and lows of the closing prices of the shares on the stock exchange during 2 weeks preceding the date of issue The above provisions of preferential allotment do not apply to conversion of loans or debentures in equity shares provided the terms of the loan or terms of issue of debentures give an option to convert such loans or debentures into shares of the company. Such terms and conditions must be approved before the issue of debenture or raising of the loan by the Central Government or must be in confirmity with the rules made by the Government for this purpose. The proposal must be approved by the special resolution passed by Company at the general meeting before the issue of debentures or raising of the loan. For this purpose the Central Government has framed the Public Companies (Terms of issue of debentures and raising of loans with option to convert such debentures or loan into equity shares ) Rules, 1977. The following is the broad gist of these rules :- . The debenture or loan is raised or issued either through private subscription or through issue of the prospectus to the public. . The financial institutions specified for this purpose either underwrite or subscribe to the whole or part of the issue of debentures or sanction the raising of loan. . Having regard to financial position of the company, the terms of issue of debentures or terms of loan (eg rate of interest payable on debenture and loan the capital of the company, its liabilities and its profits during immediately preceeding five years and the current market price of shares of the company), the conversion must be either at par and or at premium not exceeding 25 percent of the face value of the shares. The provisions of rights and preferential issue do not apply in the following cases :- . Increase in share capital by a private company. . Increase in share capital by a deemed public company. Issue of shares at discount A company may issue shares at a discount i.e at a value below its par value. The following conditions must be satisfied in connection with the issue of shares at a discount :- . The shares must be of a class already issued . Issue of the shares at discount must be authorised by resolution passed in the general meeting of company and sanctioned by the company law board. . The resolution must also specify the maximum rate of discount at which the shares are to be issued . Not less than one year has elapsed from the date on which the company was entitled to commence the business. . The shares to be issued at discount must issued within 2 months after the date on which issue is sanctioned by the company law board or within extended as may be allowed by the Company Law Board. . The discount must not exceed 10 percent unless the Company Law Board is of the opinion that the higher percentage of discount may be allowed in special circumstances of case. Issue of shares at premium A company may issue shares at a premium i.e. at a value above its par value. The following conditions must be satisfied in connection with the issue of shares at a premium:- . The amount of premium must be transfered to an account to be called share premium account. The provisions of this Act relating to the reduction of share capital of the company will apply as if the share account premium account were paid up share capital of the company. . Share premium account can be used only for the following purposes :- . In issuing fully paid bonus shares to members. . In Writing off preliminary expenses of the company. . In writing off public issue expenses such as underwriting commission, advertisement expenses, etc . In providing for the premium payable paid on redemption of any redeemable preference shares or debentures. . In buying back its shares . Issue of bonus shares Bonus shares are issued by converting the reserves of the company into share capital. It is nothing but capitalization of the reserves of the company. Bonus shares can be issued by a company only if the Articles of Association of the company authorises a bonus issue. Where there is no provision in this regard in the articles, they must be amended by passing special resolution act at the general meeting of the company. Care must be taken that issue of bonus shares does not lead to total share capital in excess of the authorised share capital. Otherwise, the authorised capital must be increased by amending the capital clause of the Memorandum of association. If the company has availed of any loan from the financial institutions, prior permission is to obtained from the institutions for issue of bonus shares. If the company is listed on the stock exchange, the stock exchange must be informed of the decision of the board to issue bonus shares immediately after the board meeting. Where the bonus shares are to be issued to the non-resident members, prior consent of the Reserve Bank should be obtained. Only fully paid up bonus share can be issued. Partly paid up bonus shares cannot be issued since the shareholders become liable to pay the uncalled amount on those shares. Sweat Equity and Employee Stock Options Sweat Equity Shares mean equity shares issued by the company to its directors and / or employees at a discount or for consideration other than cash for providing know how or making available the rights in the nature of intellectual property rights or value additions. A company may issue sweat equity shares of a class of shares already issued if the following conditions are fulfilled :- . A special resolution to the effect is passed at a general meeting of the company . The resolution specifies the number of shares, the current market price, consideration, if any, and the class of employees to whom the shares are to be issued . At least 1 year has passed since the date on which the company became eligible to commence business. . In case of issue of such shares by a listed company, the Sweat Equity Shares are listed on a recognized stock exchange in accordance with SEBI regulations and where the company is not listed on any stock exchange, the the prescribed rules are complied with. Share certificate A share certificate is a document issued by the company stating that the person named therein is the registered holder of specified number of shares of a certain class and they are paid up upto the amount specified in the share certificate. The share certificate must bear the common seal of the company and also must be stamped under the relevant stamp act. One or more directors must sign it .It should state the name as well as occupation of the holder and number of shares , their distinctive number and the amount paid up. Every company making allotment of shares must deliver the share certificate of all shareholders within three months of allotment. In case of transfer of shares, the share certificate must be ready for delivery within two months after the shares are lodged with the company for transfer. If default is made in complying with the above provisions, the company and every officer of company who is in default is liable to punishment by way of fine which may extent to Rs500 for every day of default. The allotee must give notice to the company reminding of its obligation and even then, if default is not made good within 10 days of the notice, the allotee may apply to the Company Law Board for direction to the company to issue such share certificate in accordance with the Act. Application for this purpose must be made with the concerned regional bench of the Company Law Board by way of petition. The petition should be accompanied by the following documents :- . Copy of the letter of allotment issued by the company . Documentary evidence for the allotment of the shares or debentures for transfer . Copy of the notice served on the company requiring to make good the default . Any other correspondence . Affidavit verifying the petition . Bank draft evidencing payment of application fee . Memorandum of appearance with the Board copy of resolution of the board for the executive Vakalat Nama as the case may be Companies act does not prescribe any form for share certificate. A Shareholder must keep his share certificate in safe custody or in case of shares which are traded in demat mode, with the depository. The company may renew or issue a duplicate certificate if such certificate is proved to have been lost or destroyed or having being defaced or mutilated or torn or is surrendered to the company. However, if the company, with the intention to defraud issues duplicate certificate, the company shall be punishable with the fine upto Rs10000 and every officer of the company who is in default with imprisonment upto 6 months or fine upto Rs10000 or both. Once a share certificate is issued by the company, the name of the person in whose favour it has been issued becomes the registered shareholder. Nobody can then deny the fact of his being the registered shareholder of the company. Similarly, if the certificate states that on each of shares a certain amount has been paid up, nobody can deny the fact that such amount has been paid up (MORE)
Certain debentures are made out in the names of the particular persons whose names appear in the register of debenture holders. Such debentures which appear in this register are known as "Registered Debentures". They are transferable in the same way as shares. Interest as well as the debenture amoun…t in these cases is payable only to the registered holders. (MORE)
A debenture is an unsecured bond that's issued either by agovernmental or civil corporation and backed only by the creditstanding or integrity of the issuer, not collateral. It isdocumented by an indenture, which is an agreement.
Issue of the zero interest debenture does not carry any explicit rate of interest.The difference between th face value and the purchase price is the return to the investor(lender).
Characteristics of a debenture: 1. It is an instrument in writing. An oral promise in acknowledgement of a debt is not a debenture. 2. It is an acknowledgement of the indebtedness of the company to its holder for the amount stated in it. 3. It is usually under the seal of the company but it is not… necessary. A certificate signed by two directors of a company and without bearing the company's seal is a valid debenture. 4. It is one of a series of like debentures. But a single debenture may be issued to one man. 5. It provides for the payment fixed sum with interest of a specified rate by a specified time. But this is not essential because a company may issue perpetual debentures. Section 120 of the companies' act 1956 expressly provides for the issue of perpetual or irredeemable debentures w3hich are made payable only in the event of a winding up or some serious default with the company. 6. It is generally secured by a charge, fixed or floating on any part of the company's property or undertaking. But this is, however, not an essential condition because section 2(12) provides that the debentures may or may not constitute a charge on the assets of the company. From Rohit Mathur Jaipur (MORE)
debenture holders are not the owner of the company.they are considered as the creditors of the corporation or in other words the company borrow money from them through issuing debentures.moreover, they has no voting rights in the company's general meeting.
What is a Debenture? A Debenture is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument… and repays the principal normally, unless otherwise agreed, on maturity. These are long-term debt instruments issued by private sector companies. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. Long maturity debentures are rarely issued, as investors are not comfortable with such maturities Debentures enable investors to reap the dual benefits of adequate security and good returns. Unlike other fixed income instruments such as Fixed Deposits, Bank Deposits they can be transferred from one party to another by using transfer from. Debentures are normally issued in physical form. However, corporates/PSUs have started issuing debentures in Demat form. Generally, debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. Debentures can be secured or unsecured. What are the different types of debentures? Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: Â· Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares Â· Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription. Â· Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company. Â· Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. On basis of Security, debentures are classified into: Â· Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. So if the issuer fails on payment of either the principal or interest amount, his assets can be sold to repay the liability to the investors Â· Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount, the investor has to be along with other unsecured creditors of the company. (MORE)
Hi merit of dbenture - trading on equity is possible as debenture holders get a lower rate of return than the earnings of the company. demerit of debenture-cost of raising capital through debentures is high of high stamps duty.
it is a document that serve as evidence of a debenture for a debenture share holder
Typically no, unless this is agreed upon between the debt holder and the issuing institution. The exception to this is callable debt, which allows the issuing corporation to pay off the debt within a certain window, specified by the terms of the issuance.
No,debenture holders are not treated as members. Debentures are mere debts and debenture holders are just creditors.They give their money to the company at a fixed interest rate.Debenture holders being creditors get guaranteed interest, as agreed, whether the company makes profit or not. Also d…ebenture holders have no right to attend and vote at the meetings of the share holders. Answered By:- Karunakar Gautam DCE Student (MORE)
Bonds are a lot more reliable than a debenture because it hasinterest rates that are low and there is collateral for the loan.And also if bankruptcy occurs, debenture holders are reimbursedlong after than bondholders.
The Debenture loan is an unsecured debt backed by the credit worthiness of the borrower. The interest is calculated based on the 10-year Treasury rate plus a market-driven spread, which is currently about 65-75 basis points.
A company can buy its own debenture in the open market, if it is authorised by its AOA. the debentures so purchased can be used either for immediate cancellation or redemption of debenture or for investment. the debenture so purchase for investment can be subsequently either be issued to fullfill ad…ditional requirements of cash or can be cancelled if the company so desires. debentures when purchases for investment are popularly known as 'OWN DEBENTURES.' (MORE)
If they are due to be redeemed within the year then yes, otherwise they would be non-current liabilities.
Corporations with sound credit standing are able to issue bonds without pledging assets. Such bonds are called debenture bonds, or unsecured bonds.
No Debentures can not be redeemed out of capital only. Gov of India and SEBI has indirectly placed restrictions on redemption of debentures. Now it is compulsory to create Debenture Redemption Reserve at-least 50% of the debentures issued.
No, A debenture bond owner is just like any other bond owner. A debenture bond is an uninsured bond. The owner of a bond is just lending their money to a company for a long-term period. A bond is an example of a long-term debt. An owner of a company would be an example of an equity such as a s…tockholder (common, or preferred). (MORE)
Debenture Suspense is adjustment account which is prepared at the time of issue of debenture as collateral security to record the collateral issue.
The debentures of a company are a movable property, transferable in the manner provided by the Articles.
In the US, a debenture is a certificate acknowledging an unsecured debt (i.e. one without collateral). It is sometimes synonymous with corporate bonds or notes, as a debenture does not afford participation as a stockholder. The underlying meaning is the ability of a customer to obtain goods or se…rvices before payment, with the understanding that payment will be made in the future. This is the same basic concept as a credit purchase. *In the UK, a debenture is usually a secured bond, synonymous with the US term "mortgage bond." (MORE)
A redeem code is a unique number which will give you a addon, Live, points and more. When you have this code, just simply press your middle X button on your controller, go all the way to the left and select redeem code.
In law, a debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond , loan stock or note . A debe…nture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements. Do your homework kid. (MORE)
debenture is a loan to company and its face value will be higher moreover it carries fixed interest which is charge against profits.so there is no chance from the side of debenture holder for non payment of calls after repeated notices from the company. from the view point of company it cannot forfi…et a debenture and treat it as a capital profit because they are not owners is this explanation coreect for that question? (MORE)
It is capital loss of the company. It comes only in the time when redeem debenture. It is shown when we issue the debenture because it is one of the redeemable condition. it is loss of future but comes in balance sheet as separate account the name of premium redemption account in liability side so, …it is carried at the time of issue. (MORE)
Most companies retire debentures by issuing another set ofdebentures, hence, most companies don't park funds for retiringdebentures by creating any fund. The bond market will surely getaffected negatively by such a move of the ministry of corporateaffairs. Section 117C of the Companies Act, 1956, re…quires every companyissuing debentures to create a debenture redemption reserve (DRR)for the redemption of such debentures and transfer an 'adequate'amount from its profits every year to such DRR until the issueddebentures are redeemed. Hence, every issue of redeemabledebentures requires creation of a DRR. The said Section, however,does not provide the meaning of the word 'adequate'. In the year2002, the ministry of corporate affairs (MCA) issued a circularclarifying the meaning of 'adequate' and provided the percentagewhich is mandatorily required to be transferred to DRR by certainclass of companies. However, to develop the bonds market, MCAissued another clarification circular on 11 February 2013 (Circular2013) (MORE)
Type your answer here... debenture, which is secured and redeemable and which is non convertible in future is called secured redeemable non convertable debenture
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Yes,debenture in the balance sheet because debentures is liability for the company so it comes debit side in balance sheet in the books of the company.
With a debenture, a company can hold a debt with another. A debenture is a loan agreement where there is no collateral or assets involved. It is based on the promise and credit history of the company that it will be paid back.
Debentures can be encashed. However, if this is done prior to maturity but after one year, the owner will be required to pay capital gains tax on the return.