A company can issue debentures which can subsequently be converted to shares either wholly or partly when these debentures are being redeemed. The issuing of such debentures has to be necessarily approved by a special resolution which is passed at a general meeting of the company. Such debentures which have voting rights can also be included and be issued. Further, secured debentures can also be issued by a company. However, issuance of secured debentures is subject to the terms and conditions followed by the company
Every company which issues debentures has to maintain a register along with the requisite details which is statutorily mandated. In the eventuality of any mistake arising in the registers, the same can be rectified.
The mandated fields in the register:
1. Name of the Debenture holder
2. Address and occupation
3. Number and value of debentures held, along with any payments which have been made by the company in this regard.
4. Date of becoming a debenture holder
5. Date on which the status of the debenture holder ceases
It was initially mandatory for the companies to keep a certain amount of money as reserve for the redemption of loans, which includes redemption of debentures. This reserve fund has to be kept out of the profits of the company and needs to be used for no other purpose except for the payments to be made against loans and debentures. However, since 2019 the debenture reserve has been made not a mandatory requirement for listed public companies and NBFC’s. To link the regulation of debentures with recent developments in debenture frauds, Recently Ketan Parekh ( not the stock broker) who has been convicted for 2 years and sentenced to jail by a CBI special court, for causing losses to bank of Baroda. The accused has obtained duplicate of the debentures from the bank, while simultaneously pledging the original debentures of Reliance Industries Limited “F” series. It must be remembered that public issue of debentures, that in such instances it is mandatory to comply with various SEBI Regulations. The guidelines of “DIP” which are the Disclosure and investor protection) guidelines. Public issue has been defined as “an invitation by a company to public to subscribe to the securities which are offered though a prospectus.” In multiple ways, they are similar except that a share holder is a member of the company and can have certain decision-making powers whereas a debenture holder is merely a creditor. Also, debenture holders are legally entitled to fixed rate of interest which the company has to be the debenture holders irrespective of making profits or losses. The incentive to invest in debentures is therefore, that it is safer than shares and also give a higher rate of interest than an ordinary fixed deposit in a bank.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.