Question

Z Ltd. had issued following debentures: 

(a) 1,00,000, 10% fully convertible debentures of Rs. 100 each on 1st April, 2016 redeemable by conversion after 5 years. 

(b) 20,000, 10% Debentures of Rs.100 each redeemable after 4 years, 25% Debentures in Cash and 75% by conversion. State the amount of DRR required to be created as per the Companies Act,2013.

Answer 1

(a) As the debentures are fully convertible, there is no need for creation of Debenture Redemption Reserve.

(b) For the non- convertible parts of debentures, DRR would created as follows:

Amount required to be transferred to DRR (25% of Face value) =20,00,000 x 25% = 1,25,000