Question

Justify the following statement.

A company can issue only certain types of debentures.

Answer 1

• The debenture holders are the creditors of the company. They offered borrowed capital to the company but cannot participate in the management of the company.
• Therefore, in order to protect the interest of debenture holders, SEBI, through its guidelines allowing companies to issue certain types of debentures in India.
• Therefore, the companies operating in India can issue secured debentures, convertible debentures, redeemable debentures to the applicant.
• It protects the interest of creditors in the company.
• Thus, it is rightly said that a company can issue only certain types of debentures.