What is the procedure for a PVT company to issue debenture?

What is Debenture?

As per section 2(30), debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not;

Provided that—

(a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and

(b) such other instrument, as may be prescribed by the Central Government in consultation with the Reserve Bank of India, issued by a company,

shall not be treated as debenture.

Procedure for Private Limited Company to issue Debenture consists following stpes:

1. Pre-Board meeting process:

• Prepare List of Debenture Subscribers

• Prepare Draft Offer Letter under PAS-4

• If offer for subscription is for more than 500 Person then Identify Debenture Trustee

• If debenture trustee is appointed then consent of such Debenture trustee will require

• Open Separate Bank account

• In case of issue of secured Debenture then identification of Asset on which charge will be created

• In case of issue of convertible Debenture valuation report of equity share need to be obtained by Chartered Accountant.

2. Convening Board Meeting:

• Issue notice of Board Meeting minimum before 7 days with agenda as attachment

• Hold Board Meeting to pass resolution for following:

• Note on Valuation report

• Decide type of Debenture company wants to issue

• Approval of Offer Letter

• Issue notice for holding General Meeting

• Opening of Separate bank account

3. Convening Extra Ordinary General Meeting:

• Hold Extra ordinary General Meeting to pass special resolution for following:

• For Private Placement of Debenture

• For Increasing borrowing limit for issuance of Debenture

• File Form MGT-14 within 30 days of passing special resolution.

4. Circulation of Letter of Offer:

• Circulation of Letter of Offer in form of PAS-4 shall be done within 30 days of General Meeting

5. Filing of Form GNL-2:

• Form GNL-2 need to be filed within 30 days from issuance of Letter of offer with the attachment PAS-4 and PAS-5

6. Convening of Board Meeting:

• Issue notice of Board Meeting on receipt of payment from all subscriber minimum before 7 days with agenda as attachment.

• Hold Board Meeting to pass resolution for following:

• Allotment of Debenture

• Issue of Debenture Certificate

• Debenture Deed (SH-12)

• Creation of DRR

• Creation of charge on asset if required

• File Form PAS-3 within 30 days from allotment of debenture.

7. Maintenance of registrar of Member:

• The entries into registrar need to be maintained as per form MGT-2 within 7 days on approval of allotment of Debenture by board.

8. Filing of CHG-9:

• Form CHG-9 needs to be file with ROC in case of issuance of Secured Debenture with relevant attachment.

9. Issuance of Debenture Certificate:

• Debenture Certificate needs to be issued within 6 months from date of allotment of Debenture.

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