Justify the following statement : A company has to create charge on its assets for issuing secured debentures.

Answer: The statement is correct, because a charge on assets is what makes debentures secured.

• Secured debentures are debentures whose repayment of principal and interest is secured by a charge (fixed or floating) on the assets of the company.
• Under Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014, secured debentures must be secured by creating a charge on the properties or assets of the company, of a value sufficient to cover the amount and interest.
• A debenture trust deed must be executed within 60 days of allotment and a debenture trustee appointed to protect the debenture holders.
• The charge must be registered with the Registrar of Companies within 30 days of its creation.
• If the company defaults, the trustee can sell the charged assets to repay the debenture holders.

Hence, without creating a charge, a company cannot issue secured debentures.