By going through these Maharashtra State Board Secretarial Practice 12th Commerce Notes Chapter 7 Correspondence with Debentureholders students can recall all the concepts quickly.
Maharashtra State Board Class 12 Secretarial Practice Notes Chapter 7 Correspondence with Debentureholders
Joint Stock Company requires huge amount of capital for business. It is raised through:
(i) Issuing Shares
- Shares are issued at the beginning.
- Share Capital is the owned capital.
(ii) Issuing Debentures
- Debentures are issued at the later stage.
- It is an acknowledgment of debt.
- Debenture Capital is the borrowed capital.
- It is a safe and secured capital.
- Debenture holder is the creditor of the company.
- Debentures are issued for a specific period carrying fixed rate of interest.
→ In the beginning, shares are issued and debentures are issued at a later stage.
→ Joint stock companies raise its borrowed capital by issuing debentures.
→ Debenture is an acknowledgement of debt.
Points to be considered while corresponding with Debenture Holders-
While writing letters to the debenture holder, the following points should be considered.
- Debenture holders are company’s creditors, so due respect should be given in correspondence which means there should be courtesy in writing.
- Prompt reply should be given to the incoming letters of debenture holders.
- Secretary should be aware and follow the legal provisions of Companies Act, 2013 related to the issue of debentures, conversion and repayment of interest.
- Correspondence should be transparent. Company should not hide any adverse information about credit rating.
- It should be concise but complete.
- Information should be updated and precise.
- Confidential information about the company should not be disclosed. Secrecy has to be maintained.
- A good image of the company should be maintained with the debenture holders.
Circumstances for secretarial correspondence with Debenture Holders-
Correspondence means ‘communication in writing’ i.e. writing a letter.
Secretary has to correspond with debenture holders in the following circumstances:
- About allotment of debentures.
- Intimation about payment of interest through:
- Interest Warrant
- Electronic Payment of Interest
- For conversion of debenture into equity shares.
- For redemption of debentures.
Debenture Allotment Letter:
- Company allots debentures to the applicant i.e. debenture holder.
- Allotment Letter is preserved by the debenture holder till he receives Debenture Certificate in exchange of this letter.
- Contains details of issue of debentures i.e. name of debenture holder, debentures issued, face value,
- types of debentures, rate of interest, etc.
Payment of Interest Letter:
- Interest is paid to the debenture holders through:
- Interest Warrant
- The letter contains details such as a number of debentures, distinctive numbers, the gross amount of interest payable, TDS deducted, the net amount of interest payable, etc.
- Board Resolution is required for the payment of interest on debentures.
Conversion of Debentures Letter:
- Debentures are converted into equity shares.
- Conversion of Debenture Letter is issued only when the company receives Letter of Option.
- After conversion, a share certificate will be issued.
- Approval of shareholders is necessary by passing a special resolution at Extra-Ordinary General Meeting.
- Only after receiving the shareholders’ approval, letter of conversion of debentures is sent to debenture holders.
Redemption of Debentures Letter.
- Debentures are redeemed after a specific period.
- Debenture Redemption Reserve Fund (DRRF) is created for the redemption of debentures.
- Debenture Redemption Form (DRF) is sent along with the letter.
- This letter informs that their debentures have become due for redemption.