Can a private limited company issue debentures?

Can a private limited company issue debentures?

Yes, a private limited company can issue debentures.

The power to issue debentures can be exercised on behalf of the Company as a meeting of the Board under the provisions of Section 179 (3) of the Companies Act, 2013. Further Section 71 of the Companies Act, 2013 deals with the provisions relating to the issuance of debentures along with the penalties for non compliance of the same which can be summarized as follows:

  • A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption. Provided that the issue of debentures with an option to convert such debentures into shares shall be approved by a special resolution passed by the shareholders in a duly convened general meeting of the company.
  • Company can issue secured and unsecured debentures. Secured debentures may be issued by a company subject to such terms and conditions as may be prescribed. Further Company cannot issue any kind of debentures carrying any voting rights.
  • A company shall pay interest and redeem the debentures in accordance with the terms and conditions of their issue.

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