Violet Ltd. company plans to raise ₹10 crores by issuing debentures. The Board of Directors have some queries. Please advise them on the following :(a) Can they issue convertible debentures?(b) As the company is offering debentures to its members, ca…

Answer: (a) Yes. (b) No. (c) Borrowed capital.

(a) Yes, Violet Ltd. can issue convertible debentures, fully or partly convertible into shares, provided the issue is approved by a special resolution passed in a general meeting (Section 71(1) of the Companies Act, 2013).

(b) No. Under Section 71(2), a company cannot issue debentures carrying voting rights, even if they are offered to its own members.

(c) Capital raised by issuing debentures is borrowed capital, because debenture holders are creditors of the company and are paid interest and repaid on maturity.