Sarthaks APP
+1 vote
in Accounts by (64.1k points)
Explain the guidelines of SEBI for creating Debenture Redemption Reserve.

1 Answer

+1 vote
by (106k points)
selected by
Best answer

Securities and Exchange Board of India (SEBI) have provided some guidelines for redemption of debentures. 

The focal points of these guidelines are: 

(i) Every company shall create Debenture Redemption Reserve in case of issue of debenture redeemable after a period of more than 18 months from the date of issue. 

(ii) The creation of Debenture Redemption Reserve is obligatory only for non-convertible debentures and non-convertible portion of partly convertible debentures. 

(iii) A company shall create Debenture Redemption Reserve equivalent to at least 50% of the amount of debenture issue before starting the redemption of debenture. 

(iv) Withdrawal from Debenture Redemption Reserve is permissible only after 10% of the debenture liability has already been reduced by the company. 

SEBI guidelines would not apply under the following situations: 

(i) Infrastructure company (a company wholly engaged in the business of developing, maintaining and operating infrastructure facilities), and 

(ii) A company issuing debentures with a maturity period of not more than 18 months.

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.