Explain the provisions of Companies Act, 2013 for issue of debentures.

Answer: Section 71 of the Companies Act, 2013 and Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 lay down the provisions for issue of debentures.

1. Power to issue: the Board of Directors issues debentures by passing a resolution at a Board meeting (Section 179). Where the borrowing exceeds the paid-up capital, free reserves and securities premium, approval of members by special resolution is needed (Section 180).
2. Convertible debentures: debentures with an option to convert them fully or partly into shares can be issued only after a special resolution in the general meeting (Section 71(1)).
3. No voting rights: no company can issue debentures carrying voting rights (Section 71(2)).
4. Secured debentures: secured debentures must be secured by a charge on the assets of the company of a value sufficient to repay the amount and interest. Their redemption period cannot exceed 10 years (30 years for infrastructure companies). The charge must be registered with the ROC within 30 days.
5. Debenture trustee and trust deed: when debentures are offered to the public or to more than 500 persons, the company must appoint one or more debenture trustees before issue and execute a debenture trust deed within 60 days of allotment, to protect the interests of debenture holders.
6. Debenture Redemption Reserve (DRR): the company must create a DRR out of profits available for dividend, as prescribed by the rules, for redemption of debentures.
7. Offer document and credit rating: a public issue requires a prospectus (or a private placement offer letter for private placement), and the debentures must be rated by a credit rating agency; listed issues must follow SEBI regulations.
8. Issue of certificates: debenture certificates must be issued within 6 months of allotment, or the debentures credited in demat form.
9. Register of debenture holders: the company must maintain a register of debenture holders (Section 88).
10. Redemption: debentures must be redeemed as per the terms of issue; if the company fails, the Tribunal may order redemption on application by debenture holders or the trustee (Section 71(10)).