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Private limited company - debentures

Shirley (student) (43 Points)

15 February 2011

can private limited company issue secured non-convertible debentures to more than 50 people?

I understand that it cannot issue covertible debentures to more than 50 people as they will eventually be shareholders.

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shakeel (cs) (21 Points)
Replied 15 February 2011

Originally posted by : Shirley
	can private limited company issue secured non-convertible debentures to more than 50 people? I understand that it cannot issue covertible debentures to more than 50 people as they will eventually be shareholders.

refer sec 3(1)(iii) which gives the definition of a pvt co. it says a pvt co can issue deposits only to members, director or their relatives. Companies (acceptance of deposit) rules states that unsecured debentures amount to deposits. however, exemption from the application of these provisions is available in the rules which states that acceptance of deposits of any kind from member, Director or directors' relatives shall not be 'deposits' within the emaning of the act and the rules. Therefore, by inference, a pvt co cannot issue deposits to persons other than those mentioned in sec 3(1)(iii). now the answer to your questions:

1. unsecured debentures can be issued only to members, directors or directors' relatives
2. no form needs to be filed with ROC
3. unsecured debentures issued to members, directors or directors' relatives do not amount to 'deposits', hence exempt from the provision relating to deposits