What is the limit for a private limited company to issue debentures?

A Private Limited Company can issue debentures under the Companies Act, 2013. The power to issue debentures can be exercised under provisions of section 179(3) of Companies Act, 2013 for which board meeting of Directors is to be held on behalf of company. It is also provided under section 71 of Companies Act, 2013 relating to issuance of debentures along with the penalties for non-compliance, which can be summarized as follows:

• A company can issue both secured and unsecured debentures. Secured debentures can be issued according to the prescribed rules.

• A company cannot issue any kind of debentures which is carrying any voting rights.

• A company can issue debentures with an option to convert such debentures into shares,either wholly or partly at the time of redemption, which shall be approved by the shareholders by a special resolution in a duly convened general meeting of the company.

• A company cannot issue a prospectus/make an offer/invitation to public or to its members exceeding 500 for the subscription of its debentures.

• A company shall to pay interest and redemption of debentures according to the terms of issue of such debentures.

• Company shall create a debenture redemption redemption reserve account out of profits of company. It shall not be utilized by the company except for redemption of debentures.