REDEMPTION OF DEBENTURES
Redemption in a general sense means that the company has to repay the amount that was collected while issuing any debenture. This can occur either at par or can also take place at a premium but in no circumstances it will take place at discount. The redemption of the debentures can occur at the end of any term if specified. This can occur by providing cash against it or can get an option to get it converted into any shares. They can be redeemed as per:
The redemption should take place as per the terms of the issue and any other changes will lead to default. The redemption can occur by following one of the four mentioned methods:
1. Payment takes place in Lump SumIn this scenario when the debentures get matured or the term of that gets expired then the company can make the repayment of the said debenture to the holder by paying him the entire amount at one go. This payment can also be done by the company before the term of the specific debentures comes to an end.
2. Payment Occurs in Instalments
If a company wishes to make the payment at different timings, then it can make sure that the repayment at the end of the term occurs through installments. The payment should be done at some proper and specific intervals
3. Purchase in Open Markets
In a scenario where the company itself buys its debentures with the purpose of cancellation then such a purchase would occur at an open market. The purchasing and canceling will lead to the redemption of the debenture.
4. Conversion into Shares
As mentioned earlier that if a company provides an option to the holder that at the end of the term they can covert the debenture into shares then it is upon the holder as to how he wants to redeem the debenture. If the holder wishes to convert them as he finds the holdings to be profitable then as per the rules of the company he can ask for conversion. If the holder wants to continue that debenture, then he can ask for a new issue of a debenture. It is important to note that such an issue will only be allowed if the debentures are convertible. The new issue after the redemption can occur at par, discount, or premium
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.
