Yes a private limited company can issue debenture but such Private Company must issue Debentures only as a Secured Debenture.
There are 2 reasons behind issuing Secured Debenture only:
1. Under the Companies (Acceptance of Deposit) Rules, 1975 “any amount raised by issue of debentures (including convertible debentures) secured by the mortgage of any immovable property of the company and that the market value of the immovable property secured is higher than the amount of debentures issued” is not considered to be a DEPOSIT.
2. Under Section 3(1)(d) of the Act, a Private Company is prohibited from accepting Deposit from persons other than its Directors, Members and their relatives.
The following approvals are required to be obtained by the Company through resolution in board meeting:
1. Board approval for issue of Debentures under Section 292(1)(b). 2. Board approval for Creation / Declaration of Trust 3. Board approval for Appointment of Debenture Trustees (Section 117B) 4. Board Approval of Draft Trust Deed 5. Board Approval of the Form of Debenture Certificate. 6. Letter from Trustees Consent from the Debenture Trustees to act as Trustees.
No approvals are required to be obtained under Section 293(1)(a) and (d) since, the Section does not apply to Private Limited Companies, unless it is a Subsidiary of a Public Company.
thanx alot for such info, Actually i wanna know wat r the Preliminaryrequiements to do so by the co., Is it thu MOA & AOA or normally any pvt ltd. co. can issue such debentures?
10 August 2009
Pl let me know da procedure / provide me da notes related to Step by step procedure related to Debentures & Prefrence Shae Capital for Ltd & Pvt. ltd. Cos. becuz i just wanna ubderstand both da terms!!!
10 August 2009
Pl let me know da procedure / provide me da notes related to Sep by step procedure related to Debentures & Prefrence Shae Capital becuz i just wanna ubderstand both da terms!!!
10 August 2009
Fund raising for the business through the issue of debenture etc is a general practice/right of a private company. However in certain times bank can demand specific power in the company MOA & AOA.
For safety side amend your AOA & MOA suitably to insert the power to issue the debenture.
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