Issue of Debentures — Secretarial Practice STD 12 Commerce / Arts — Question
Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsSecretarial PracticeIssue of Debentures4 Marks
Question
Who are debentures trustees?
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Answer
Debentures Trustee is a person or institution which protects the interest of the debenture holders. The Trustees become the custodian of the assets on which charge has been created.
A company that issues a prospectus or invites more than 500 persons to buy its debentures has to appoint one or more Debentures Trustees. Companies issuing secured debentures also must appoint Debentures Trustee.
Debentures Trustee is appointed before prospectus or letter of offer/offer letter is issued or within 60 days after the allotment of the debenture. The Trustees must give written consent to act as Debenture Trustees.
According to SEBI Rules, 1993 “debentures trustee” means a trustee of a trust deed for securing any issue of debentures of a body corporate (section 2 (bb)). (Applicable to public companies only).
The trustee can appoint a nominee to the board of directors of the company. Before the trustee appoints the nominee, the following conditions must be satisfied:
Two consecutive defaults made by the company in payment of interest to the debenture holders; or
Default in the creation of security for debentures or default in the redemption of debentures.
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