MEANING AND
DEFINITIONS
Meaning :
The word
debenture is derived from the Latin word, `Debere' which means 'to owe
something to someone'. Debenture is an acknowledgement of debt issued by a
company under its common seal. It also means that debenture is a proof of loan
taken by the company on certain terms and conditions.
Definitions
:
(a) According to Section 82 of the Companies
Act-'Debenture to any member of the company is a movable property, transferable
in the manner provided by the Articles of Associations'.
(b) According to Oxford Dictionary `Debenture
is a certificate issued by a company acknowledging that it has borrowed money
on which interest is being paid.'
INTRODUCTION
Company can
issue debentures to raise loan capital. It is the method of raising borrowed
capital. A person purchasing a debenture is called as debenture holder of the
company. He is creditor of the company. He is entitled to get interest at a
fixed rate. Debentures can be issued at any time by all companies may be public
or private. The power to issue debentures rests with the Board of Directors
vide Section 292 of the Companies Act. Debentures may be issued at par, at
a premium or at a discount.
Debentures
refers to a certificate issued by a person or corporation with the purpose of
acknowledging or creating a debt. Debentures are generally unsecured by assets
and are interest bearing securities.
WHAT IS A
DEBENTURE ?
A Debenture
means a document / debt security / certificate of loan or a loan bond
evidencing, containing an acknowledgement of indebtedness issued by a company ( called the Issuer ) under the companies seal
and giving an undertaking which provides for the payment of a principal sum and
interest thereon at regular intervals, which is usually secured by a
fixed or floating charge on the companies property or undertaking and which
acknowledges a loan to the companies property which offers to pay interest in
lieu of the money borrowed for a certain period at a fixed rate and at the
intervals as stated in the debenture.
A debenture
is defined as a certificate of agreement of loans which is given under the
company's stamp and carries an undertaking that the debenture holder will get a
fixed return (fixed on the basis of interest rates) and the principal amount
whenever the debenture matures.
A type
of debt instrument that is not secured by physical asset or collateral.
Debentures are backed only by the
general creditworthiness and reputation of the issuer.
Although
the money raised by the debentures becomes a part of the company's capital
structure, it does not become share
capital.
In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is defined as "any form of borrowing that commits a firm to pay interest and repay capital. In practice, these are applied to long term loans that are secured on a firm's assets. Where securities are offered, loan stocks or bonds are termed 'debentures' in the
The advantage of debentures to the issuer is they leave specific assets burden free, and thereby leave them open for subsequent financing. Debentures are generally freely transferable by the debenture holder. Debenture holders have no voting rights and the interest given to them is a charge against profit.
In essence
it represents a loan taken by the issuer who pays an agreed rate of interest
during the lifetime of the instrument and repays the principal normally, unless
otherwise agreed, on maturity.
These are
long-term debt instruments issued by private sector companies. These are issued
in denominations as low as Rs 1000 and have maturities ranging between one and
ten years. Long maturity debentures are rarely issued, as investors are not
comfortable with such maturities
Debentures
enable investors to reap the dual benefits of adequate security and good
returns. Unlike other fixed income instruments such as Fixed Deposits, Bank
Deposits they can be transferred from one party to another by using transfer
from. Debentures are normally issued in physical form. However, Corporates /
PSU’s have started issuing debentures in Demat form. Generally, debentures are
less liquid as compared to PSU bonds and their liquidity is inversely
proportional to the residual maturity. Debentures can be secured or
unsecured.
In corporate
finance, the term is used for a medium-to-long-term debt instrument used by large companies to
borrow money. In some countries the term is used interchangeably with bond, loan
stock or note.
Senior
debentures get paid before subordinate debentures, and there are varying rates
of risk and payoff for these categories.
Both
corporations and governments frequently issue this type of bond in order to
secure capital. Like other types of bonds, debentures are documented in an
indenture.
Debentures
are generally freely transferable by
the debenture holder. Debenture holders have no rights to vote in the company's
general meetings of shareholders, but they may have separate meetings or
votes e.g. on changes to the rights attached to the debentures. The interest
paid to them is a charge against profit in the company's financial statements.
DEBENTURES
EXAMPLE:
For
example, most Debentures are essentially unsecured bonds issued by corporations
relying on the credit worthiness of the issuer for their distribution, although
a Debenture in the United
Kingdom
WHAT ARE THE DIFFERENT TYPES OF DEBENTURES?
Debentures
are divided into different categories on the basis of:
(1) Convertibility of the instrument
(2) Security
(3) Types of nature.
Debentures
can be classified on the basis of convertibility into:
a) Non Convertible Debentures (NCD):
These
instruments retain the debt character and can not be converted in to equity
shares
b) Partly Convertible Debentures (PCD):
A part of
these instruments are converted into Equity shares in the future at notice of
the issuer. The issuer decides the ratio for conversion. This is normally
decided at the time of subscription.
c) Fully convertible Debentures (FCD): These are
fully convertible into Equity shares at the issuer's notice. The ratio of
conversion is decided by the issuer. Upon conversion the investors enjoy the
same status as ordinary shareholders of the company.
d) Optionally Convertible Debentures (OCD): The
investor has the option to either convert these debentures into shares at price
decided by the issuer/agreed upon at the time of issue.
WHAT IS THE PROCEDURE FOR THE ISSUE OF
DEBENTURES IN INDIA
The relevant sections of the companies act 1956 dealing with the
procedure for the issue of debentures are 56(3), 60, 64, 67,
70-74,108-13,117-23,128-29,133-34,143,152-54,292 and 293.
Debentures are issued in accordance with the provisions of the
articles, usually by a resolution of the board of directors. Debentures may be
issued
at par,
at a premium, or
at a discount
if permitted by the articles of the company. Debentures unlike
shares may be issued at a discount without any restriction. The reason is that
they do not form part of the capital of the company. Particulars of any
commission, discount or allowance paid either directly or indirectly to any
person for his subscribing or procuring subscription for debentures of the
company must be filed with the registrar.
Debentures may be redeemable at par or at premium but their
redemption at a discount is not permitted.
Section 117 provides that no company shall, after the commencement
of the act issue debentures carrying voting rights at any meeting of the
company.
The legal provisions as to prospectus, allotment, issue of
certificates etc. applicable to shares also apply to debentures, but the condition
of minimum subscription is not applicable to the issue of debentures.
Register and index of
debenture-holders:
Every company shall maintain a register of its debenture-holders
and enter therein the following particulars:
i) The name, address and occupation of each debenture holder.
ii) The debentures held by each holder with their distinctive
numbers, amount paid or considered as paid on them.
iii) The date on which each person was entered in the register as
a debenture-holder.
iv) The date on which any person ceased to be a debenture holder.
Every company having more than fifty debenture-holders will
maintain index of debenture-holder unless it is maintained in the form of an
index. Any alteration in the register shall be entered in the index within
fourteen days.
Debenture trust deed:
Where secured debentures are issued by a company, it is usual to
execute a trust deed conveying property to the trustees in trust for
debentures-holders. Security is enforced or action is taken thereafter by the
trustees instead of individual debenture-holders. The trust deed contains
provisions about the respective right of the company and the debenture-holders.
The following are the advantages of having a trust deed.
1. In case of a default by the company, the trustees are there to
take the necessary steps instead of leaving to the initiative of individual
debenture-holders.
2. The trustees will have a legal mortgage of the property and
will also hold the title deeds. So the persons who lend subsequently, cannot
gain priority over the debenture-holders.
3. The debenture-holders can through the trustee sell the property
charged, and thus, realize the security without the aid of the court.
4. The trustees are empowered to see that the property is kept
insured and properly maintained.
5. The trustees are authorized to appoint a receiver out of the
court or to enter into the possession of the property any carry on the business
of the company in case of urgency.
Section 118 of the act requires every company to give to every debenture-holder
or any member of the company a copy of any trust deed in respect of debentures.
Such a copy shall be given within seven days from the date of request on
payment of the specified fees. The trust deed shall be open for inspection by
any member or debenture-holder on payment of fees as if it were the register of
members.
Trustees for debenture-holders must exercise care and caution in
exercising the powers which the trust deed confers on them otherwise they would
be guilty of breach of trust. Any provision contended in a trust deed exempting
a trustee from liability for breach of trust or negligence would be void.
Section 119 nullifies clauses whereby the trustee is exempted from or
indemnified against a liability for breach of trust. However, a release given
after the liability has arisen and a provision in a trust deed for giving such
a release by a majority of not less than three-fourths in value of the
debenture-holders present and voting in person or by proxy at a meeting for
this purpose, is not void
STATUTORY
PROVISIONS RELATED TO ISSUE OF DEBENTURES
The legal
provisions regarding the issue of debentures are as under :
i) Issue
by public as well as by private companies : A Public company can issue
debentures only after obtaining a certificate to commence a business. On the
other hand, a private company can issue debentures immediately after
incorporation.
ii) Power
to issue under Section 292 (1) : The board of directors has the power to
issue debentures, such right can be exercised by passing a resolution in the
board meeting.
iii) Terms
of issue and redemption : Debentures can be issued at par, at premium or
even at a discount. Similarly debentures can be redeemed at par or at premium
but debenture cannot be redeemed at a discount.
iv) Mode
of issue : Debentures can be issued publicly by issuing a prospectus or.
privately through private placements.
v) Voting
right : According to the Companies Act, a company cannot issue debentures
carrying voting right.
vi) Security
against debentures : Now Companies can issue only secured debentures.
Companies (Amendment) Act, 2000 prohibits issue of insecured debentures.
vii) Permission
of SEBI : If the issue exceeds 1 crore, permission from SEBI has to be
obtained.
viii) Register
of debentures : Company must maintain a separate register of debenture
holders. It must contain a) names, b) addresses c) occupation of debenture
holders d) number of debentures allotted e) their distinctive numbers and f)
the amount of debentures, etc.
CONDITIONS
FOR VALID ISSUE OF DEBENTURES
The Company
must follow the conditions which are specified in the Companies Act which are
as follows -
1) A
copy of `prospectus' must be filed with the Registrar by a public company when
the debentures are to be issued to the general public.
But
when company issues debentures privately a `statement in lieu of prospectus' is
to be filed with the Registrar of Companies.
2) The
amount which the company receives from applicants for debentures should be
deposited in a schedule bank.
3) Allotment
of debentures may be made by the Board of Directors.
4) Decision
of allotment of debentures must be communicated to the applicant by sending a
letter of allotment.
5) The
total work of allotment must be completed within 120 days from the date of
issue of prospectus.
6) `Debenture
Certificate' must be delivered to the holder within 3 months of allotment.
7) Allotment
must be absolute and unconditional and as per terms noted in the application
form.
PROCEDURE
RELATING TO ISSUE OF DEBENTURES
A company
secretary is mainly related with entire process of issue of debenture. He has
to complete all statutory formalities in proper order. The procedure of issuing
debentures is as follows :
Procedure
of Issue of Debentures
Board
Resolution
Resolution
by share holders
Consent of
SEBI
Approval of
Stock Exchange
Credit
Rating
Trust Deed
Issue of
Prospectus
Receiving
Applications and Alloting Debentures
Issue of
Debenture Certificate
Register
and Index of Debenture holders
1. Board
Resolution : The Board of Directors is required to pass a resolution in
the Board meeting. The resolution should clearly specify number of debentures
to be issued, face value of debentures, rate of interest payable, terms of
redemption, etc.
2. Resolution
by share holders : If the issue of debentures exceeds the aggregate of
paid up capital and free reserves, such resolution in the general meeting is required
to be passed.
3. Consent
of SEBI : Permission of SEBI is compulsory in case the issue of debentures
exceeds Rs. 1 crore or more.
4. Approval
of stock exchange : Approval of stock exchange is required to be taken before prospectus is issued to the
public.
5. Credit
Rating : As per the SERI guidelines of 2000, the company has to get its
debenture rated by two recognized credit rating agencies such as CRISIL, CARE.
It should be disclosed in the prospectus.
6. Trust
Deed : The trust deed has to be executed between the company and the
trustees. Trustees are those who can give guarantee of protecting interest of
debenture holders and can redress the grievances of debenture holders, if any.
7. Issue
of prospectus : Before issuing prospectus to the general public it has to
be filed with the Registrar. The prospectus is an advertisement for the issue
of debentures.
8. Receiving
applications and Alloting debentures : The company must make the arrangement
to receive applications along with application money through company's banker
and debentures are to be allotted to the applicants by passing a suitable
resolution in the board meeting.
9. Issue
of debenture certificate : Debenture certificates are prepared by the
secretary. They are signed by at least two directors and issued to the
investors within three months of date of allotment. The debentures are credited
to demat account if debentures are in dematerialized form.
10. Register
and Index of Debenture Holders :-After the allotment of debentures is
made, all details about of debenture holders are entered in the Register of
Debenture holders. In case the number of debenture holders exceeds 50, the
company is required to maintain Index of debenture holders.
Obtain
application form of `Issue of Debentures' and practice to fill it.
On basis of
Security, debentures are classified into:
a) Secured Debentures: These instruments
are secured by a charge on the fixed assets of the issuer company. So if the
issuer fails on payment of either the principal or interest amount, his assets
can be sold to repay the liability to the investors
b) Unsecured Debentures: These instrument
are unsecured in the sense that if the issuer defaults on payment of the
interest or principal amount, the investor has to be along with other unsecured
creditors of the company.
On basis of
types of nature, debentures are classified into:
REDEEMABLE
DEBENTURES :
Redeemable
debentures are those securities which are to be repaid within a stipulated
period / maturity period. For instance, X co issued 9% 7 years $ 1000
Debentures. This issue of debentures has coupon rate of 9% per year and
redeemable period of 7 years. The amount raised by issuing these debentures are
to be repaid within 7 years from now.
IRREDEEMABLE
DEBENTURES :
Irredeemable
debentures are those debentures issuing by which the company has no obligations
to pay back the value of the debenture on some fixed date or time and has the
full authority to choose any time to pay back the debt until the company is a
going entity and does not default in it’s interest payments. So we take into
account only the sale value (SV) while evaluating the cost of irredeemable
debentures.
CONVERTIBLE
DEBENTURES :
If an option is given to convert debentures into equity shares at the stated rate of exchange after a specified period, they are called convertible debentures. Convertible Debentures have become very popular inIndia
If an option is given to convert debentures into equity shares at the stated rate of exchange after a specified period, they are called convertible debentures. Convertible Debentures have become very popular in
Debentures
are usually issued in a series with a pari passu (at the same rate) clause
which entitles them to be discharged ratably though issued at different times.
New series of debentures cannot rank pari passu with the old series unless the
old series provides so.
New debt
instruments issued by public limited companies are participating debentures,
convertible debentures with options, third party convertible debentures
convertible debentures redeemable at premiums, debt equity swaps and zero
coupon convertible notes.
ZERO COUPON
BONDS :
A zero-coupon bond (also called a discount
bond or deep discount bond) is a bond bought
at a price lower than its face value, with the face value repaid at the time
of maturity. It does not make periodic interest payments,
or have so-called "coupons," hence the term zero-coupon bond. When
the bond reaches maturity, its investor receives its par (or
face) value.
Examples of
zero-coupon bonds include
Long-term zero-coupon bonds, and any type
of coupon bond that has been stripped of its coupons.
In
contrast, an investor who has a regular bond receives income from coupon
payments, which are usually made semi-annually. The investor also receives the
principal or face value of the investment when the bond matures.
Some zero
coupon bonds are inflation indexed, so the amount of money
that will be paid to the bond holder is calculated to have a set amount
of purchasing power rather than a set amount of
money, but the majority of zero coupon bonds pay a set amount of money known as
the face
value of the bond.
Zero coupon
bonds may be long or short term investments. Long-term zero coupon maturity
dates typically start at ten to fifteen years. The bonds can be held
until maturity or sold on secondary
bond markets. Short-term zero coupon bonds generally have maturities of
less than one year and are called bills. The U.S.
SECURED OR
MORTGAGED DEBENTURES
Secured or
mortgaged debentures carry either a fixed charge on the particular asset of the
company or floating charge on all the assets of the company. Unsecured
debentures, on the other hand, have no such charge on the assets of the
company. They are also known as simple or naked debentures.
Re-issue of redeemed debentures:
Debentures which have been redeemed may be re-issued by a company.
Section 121 authorizes the companies to keep alive and re-issue debentures
which have been first redeemed by the company unless the articles provide
otherwise or the company has shown an intention to cancel the debenture. Such
re-issue may be of the same redeemed debentures or new debentures in place of
the redeemed ones. On such re-issue the debenture-holders will get the same rights
and priorities as any debenture-holder will get the same rights and priorities
as any debenture-holder had before the redemption. Thus, the date of redemption
of re-issue debentures cannot be later than that of the original debentures.
Re-issued debentures are treated as new debentures are treated as
new debentures for the purposes of stamp duty. The company’s balance sheet must
give particulars of any redeemed debentures which the company has power to
issue.
A contract to subscribe for debentures can be specifically
enforced.
Transfer and transmission of
debentures:
Bearer debentures are transferable by simple delivery. Registered
debentures are transferred in the same manner in which the shares of a company
are transferred. A duly filled in and properly stamped instrument of transfer
to get her with the certificate relating to debentures or with the letter of
allotment must be delivered to the company either by the transferor or by the
transferee. Company may, if so authorized by the articles, refuse to register
the transfer. If transfer is refused notice of refusal must be given to the
transferor and the transferee within two months from the date on which the
instrument of transfer was delivered to the company. An appeal lies to the
central government within two months from the date of the receipt of notice of
refusal.
The legal representative of a deceased debenture-holder may
transfer the debentures by executing an instrument of transfer.
REDEMPTION
OF DEBENTURES
As the
debenture capital is borrowed capital, it has to be paid back. The repayment of
debenture amount to debenture holder is called as redemption of debentures.
Every company is required to create a `Debenture Redemption Reserve' for the
purpose of redemption of debentures.
Provisions
regarding redemption of debentures .
1) To
create Debenture Redemption Reserve (DRR) : According to Section 117C of
the Companies Act, the company is required to create DRR out of its profit
every year until such debentures are redeemed. At least 50% amount of
debentures issued should be redeemed from DRR. Remaining amount should be
raised by issue of new equity shares or debentures.
2) Default
in Repayment : In case the default in repayment is made by the company,
the debenture holders can file a complaint with `Company Law Board'. The
Company Law Board can direct the company to repay the principal amount of
debenture with interest.
Unsecured
debenture holders can file a suit in the court for repayment. Secured debenture
holders can approach debenture trustees. The trustees can sell off the assets
of the company and repay the amount or appoint a court receiver.
3) Penalty
for Default : The person responsible for disobeying the order of Company
Law Board, shall be fined more than Rs. 500/- per day of default, till default
continues.
Procedure
for redemption of debentures :
1) Board
Meeting : Board meeting is held to pass a resolution to redeem the
debentures.
2) Intimation
about Redemption to debenture holders : Secretary has to send letter to
debenture holders specifying the details of redemption. He also informs them to
surrender debenture certificates.
3) Refund :
A secretary informs the banker to make the repayment to debenture holders.
4) Change
in Register of Debenture holders : Once the process of redemption is
completed, the changes are made in the Register of Debenture holders.
5) Changes
in the Register of Charges : The charges which were created on company's
asset in favour of debenture holders are cancelled and accordingly the changes
are made.
6) Intimation
to Registrar of Companies : Company Secretary informs the Registrar about
the details of redemption of debentures.
Methods of
Redemption of Debentures :
Redemption
of Debentures is possible by different methods.
1) Redemption
after fixed period : A notice is given by the company to the debenture
holder about redemption due. Debenture holders require to approach to company's
banker to get the form of repayment. The debenture holders require to fill up
the prescribed printed form and deposit the same along with debenture
certificate in the company's office. On receiving these documents, banks shall
make payments to the concerned debenture holders.
2) Redemption
by Annual Instalments : In this method, company makes an arrangement to
pay the interest, plus principal amount of debentures in annual instalment. Two
coupons are attached to debentures. One coupon is for getting refund of annual
instalment of principal amount and another one is for receiving payment of
annual interest. Such coupons are to be signed and required to be deposited
with the company's banker. Accordingly refund is made by the bank on behalf of
the company.
3) Redemption
by Draw Method : Company adopts lottery method for redemption. Debentures
are divided in different lots, and each lot is taken in draw system. And that
lot drawn is paid back after giving them intimiation regarding the payment. In
this way all lots are refunded in order of draws.
4) Redemption
by own purchase method : In this method, company purchases its own
debentures from open market at a certain price. After purchasing it such
debentures are cancelled. By this way debentures are gradually redeemed.
5) Redemption
by fresh issue method : In this method old debentures are redeemed by
issue of fresh debentures. The debenture holders get new debentures in place of
old debentures.
FEATURES OF
DEBENTURES:
1.
Investors who invest in the debentures of the company are not the owners of the
company. They are the creditors of the company or in other words, the company
borrows the money from them.
2. Funds
raised by the company by way of debentures are required to be repaid during the
life time of the company at the time stipulated by the company. As such,
debenture is not a source of permanent capital. It can be considered as a long
term source.
3. In
practical circumstances, debentures are generally secured i.e. the company
offers some of the assets as security to the investors in debentures.
4. Return
paid by the company is in the form of interest. Rate of interest is
predetermined, but the same can be freely decided by the company. The interest
on debenture is payable even if the company does not earn the profits.
5. In
financial terms, debentures prove to be a cheap source of funds from the
companies point of view.
DISADVANTAGES
OF DEBENTURES:
a) By
issuing the debentures, the company accepts the risk of two types. These are
payment of the interest at a fixed rate, irrespective of the non-availability
of profits and repayment of principal amount at the pre-decided time.
If earnings
of the company are not stable or if the demand for the products of the company
is highly elastic, debentures prove to be a very risky proposition for the company.
Any adverse change in the earnings or demand may prove to be fatal for the
company.
b)
Debentures are usually a secured source for raising the long term requirement
of funds and usually the security offered to the investors is the fixed assets
of the company.
A company
which requires less investment in fixed assets, such as a trading company, may
find debentures as a wrong source for raising the long term requirement of
funds as it does not have sufficient fixed assets to offer as security.
FROM THE
INVESTORS POINT OF VIEW :
# Debentures do not carry any voting rights
and hence its holders do not have any controlling power over the management of the company.
# Debenture holders are merely creditors and
not the owners of the company.
# Interest on debentures is fully taxable
while shareholders may avoid tax by way of stock dividend in place of
cash dividend.
# The prices of debentures in the market
fluctuate with the changes in the interest rates.
# Uncertainly about redemption also restricts certain investors
from investing in such
securities
CONVERSION OF DEBENTURES INTO SHARES
Section 81
(3) of the Companies Act permits the issue of convertible debentures. It
enables issue of shares to debenture holders in exchange of the amount due to
them, where the terms of issue of debentures provide for such an exchange and
such terms are approved both by the special resolution of the general meeting
and by the Central Government.
Joint Stock
Companies can issue either non-convertible or convertible debentures.
Convertible debentures are further classified as
A. Fully
convertible debentures (FCD)
B. Partly
convertible debentures (PCD)
FCD: Fully convertible debentures are those
which can be fully converted into equity shares after a specific period of
time. The debenture holder becomes the member of the company on conversion of
debentures. He becomes eligible for the shares and other rights of the
shareholders. If conversion is made after 18 months but before 36 months of
allotment, conversion is optional on the part of debenture holder.
PCD: Partly
convertible debentures are those where part of debentures are converted into
equity shares and remaining part continues to be debentures. On conversion of
partly convertible debentures the debenture holder becomes a member of company
and continues to remain as creditor till non-convertible portion is redeemed on
maturity.
PROVISIONS
FOR CONVERSION OF DEBENTURES INTO SHARES
Prospectus
/ Letter of Offer : Prospectus of a company must contain time of
conversion, rate of conversion and premium amount, if any.
Letter of
Option : Letter of Option has to be issued to debenture holder giving
details of option of conversion, conversion price, etc.
Filing of
copy : A copy of letter of option has to be filed with the SEBI before
issuing to the debenture holder.
Rate of
conversion : The rate of conversion is usually fixed at the time of issue.
In case premium price is not fixed at the time of issue and if amount of
convertible debenture exceeds, T 50% Lacs, the debenture holder should be given
option of compulsory redemption.
Rejection
of conversion offer : In case debenture holder wishes to opt for
redemption in place of conversion then it has to be paid within one month from
the date of, option and the price must not be less than face value.
PROCEDURE
FOR CONVERSION OF DEBENTURE INTO SHARE
Board
Resolution : Resolution for conversion is passed in the board meeting. and
is also approved by share holders and debenture holders. A Special resolution
is passed to that effect. A copy of this resolution is to be filed with the
Registrar of companies within 30 days of passing.
Letter of
Option : A letter of option is sent to debenture holder and one copy of
the same is filed with SEBI.
Allotment
of shares : Once the debentures are converted into equity shares a letter
of conversion is sent and debenture holders are requested to return debenture
certificates.
Change in
Register of Charges : Once the shares are allotted, company has to cancel
the charges against asset, which were created at the time of issue of
debentures, for which changes are required to be made in the Register of
Charges.
Entry in
Register of Members : Company is required to maintain a Register of
Members in which the details about the share holders viz names, address, date
of allotment, serial numbers of shares are entered.
Filing of
Return of allotment : A Return of Allotment is filed with the Registrar of
Companies within 30 days of allotment.
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