Question

A company issuing debentures with a maturity period of not more than 18 months, in that case the creation of Debentures Redemption Reserve will be :

Answer 1

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Explanation:

Exemption to Create DRR Rule 18(7) of Companies (Share Capital and Debentures) Rules, 2013 exempts the following types of companies from creating DRR:

(i) All India Financial Institution regulated by Reserve Bank of India; and

(ii) Banking Companies.

As per the guidelines of Securities and Exchange Board of India i.e. SEBI ,initially the INFRASTRUCTURE COMPANIES along with the companies issuing debentures with a maturity period of not more than 18 months , Government companies were exempted from creating the debenture redemption reserve.

Now, as per the section 71(4) of The Companies Act 2013, it is mandatory for all the companies to create DRR atleast 25% of the debentures issued, except:

All India Financial Institutions regulated by RBI and Banking Companies.

For NBFCs registered with RBI , DRR will be value of debenture issued and no DRR is required in case of privately issued debentures.