Question

Describe various provisions of Companies Act that deal with the issue of debentures at a discount. Give accounting treatment of debentures issued as a collateral security by the company

22 Sep 2022
Answer :
Word Count : 956

The Companies Act, 2013 deals with the issue of debentures at a discount through various provisions that aim to protect the interests of debenture holders and ensure that companies adhere to ethical and transparent practices while issuing debentures. Some of the key provisions of the Companies Act that deal with the issue of debentures at a discount are as follows:

  1. Section 71: This section deals with the issue of debentures at a discount and requires companies to follow specific procedures while issuing debentures at a discount. Companies are required to pass a special resolution in the general meeting, and obtain the approval of the Central Government before issuing debentures at a discount.

  2. Section 72: This section lays down the rules for the redemption of debentures issued at a discount. Companies are required to redeem debentures at par or at a premium, as specified in the terms of issue.

  3. Section 73: This section requires companies to provide adequate security for debentures issued at a discount. The security may be in the form of a charge on the assets of the company or a guarantee from another company.

  4. Section 74: This section provides for the creation of a debenture redemption reserve in case of debentures issued at a discount. Companies are required to transfer an amount equal to the discount on debentures to a separate account, called the debenture redemption reserve. This reserve __________ _________ _____ ______ ____ ______ __________ _________ ________ _____ ____.
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