(i) Redemption of Debentures : Redemption of Debentures means Repayment of the Amount of Debentures to Debenture Holders . In other words , Redemption refers to Discharge of Liability on Account of Debentures by Repaying the Due Amount of Debenture . The Terms and Conditions of Redemption are stated in the Prospectus Inviting Applications for the Issue of Debentures . The Terms of Redemption are also clearly stated in the Debenture Certificate . Hence the Redemption is made in Accordance with the Terms of Issue . Amount required for the Redemption of Debentures may be Managed by a Company from the following Sources :
- Redemption from the Proceeds of Fresh Issue of Shares and Debentures .
- Redemption of Debentures Out of Capital .
- Redemption of Debentures Out of Profits .
(ii) Loss on Issue of Debentures : Sometimes the Debentures are Issued with the specific condition that the Company will pay a premium at the time of them redemption . Although such premium will be paid at the time of actual redemption . But as it is a known Loss , the Company records such Loss at the time of Issue by Debiting an Account called , “Loss on Issue of Debentures Account”. It is done in keeping with the Conventions of Conservatism . Loss on Issue of Debentures Account is a Loss on account of Promise to Pay Debentures at a Premium at th time of their Redemption . This is a Capital Loss and is Written Off from Security Premium Reserve or from Statement of Profit and Loss , gradually every year during the Liftime of the Debentures . The entry for Writing Off will be :
Statement of Profit and Loss A/c. Dr.
To Loss on Issue of Debentures A/c
The Balance of “Loss on Issue of Debentures A/c.” is shown as “Unauthorized Expenses” on the Assets Side of the Balance Sheet
(iii) Minimum Subscription : Section 39 (1) of the Companies Act, 2013 provides that a Company cannot Allot any Securities of the Company to the Public, Unless the Amount Stated in the Prospectus as the “Minimum Subscription” has been Subscribed. Minimum Subscription means the Amount which in the opinion of the Directors, is the Minimum to be Raised by the Issue of Shares, so as to provide for the following Regulations :
- For the Payment of Purchase Price of any Property Purchased or Agreed to be Purchased
- For the Payment of Preliminary Expenses, including Underwriting Commission and Brokerage on Issue of Shares .
- For the Repayment of any Money, Borrowed by the Company for the above purposes .
- For Working Capital and any Other Expenditure required for the Usual Conduct of Business Operations .
Companies Act, 2013 has Not Prescribed the Minimum Subscription . According to SEBI Guidelines, Minimum Subscription has been Fixed at 90 % of the Issued Amount . As Per Section 79 (1), the Company has to get a Minimum Subscription Within 30 Days from the Date of Issue of the Prospectus.
