Question

Dow Ltd. Issued 2,00,000; 8% Debentures of Rs.10 each at a premium of 8% on 30th June, 2013 redeemable on 31st March, 2015. How much amount of Debenture Redemption Reserve is to be created before redemption of debentures?

Answer 1

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. Accordingly, its Rs.50,000 is required to be transferred to DRR (i.e. 25% of Rs.2,00,000) before the actual date of redemption of debentures.