Redemption of Debentures

Lesson

Part 1 — the reserve, the investment and the source of the money. Every company and figure in this chapter is imagined.

In this lesson you will

Decide whether a company must keep a Debenture Redemption Reserve and calculate the 10% minimum
Calculate and record the Debenture Redemption Investment of 15% of debentures maturing in the year
Identify companies exempt from both the reserve and the investment
Distinguish redemption out of profits from redemption out of capital and pass the entries

Part 1 at a glance

Concept

Redemption: method, source and safeguards

Redemption: method, source and safeguards

Concept

Section 71(4) of the Companies Act, 2013, with Rule 18(7) as amended in 2019.

Section 71(4): the reserve comes out of profits available for dividend and is used only for redemption.
Class of company (Rule 18(7), as amended in 2019)	Debenture Redemption Reserve	Debenture Redemption Investment
All India Financial Institution regulated by the Reserve Bank of India	Not required	Not required
Banking company	Not required	Not required
Unlisted NBFC or HFC, debentures privately placed	Not required	Not required
Listed company (other than a bank or financial institution)	Not required	15% of debentures maturing in the year
Other unlisted company	10% of outstanding debentures	15% of debentures maturing in the year