Anushka 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 the company issue convertible debentures?(b) As the company is offering debentures to its mem…

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

(a) Yes, Anushka Ltd. can issue convertible debentures, i.e. debentures with an option to convert them fully or partly into equity 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 any voting rights. Debenture holders are creditors, not owners, even if they are also members of the company. (As members they vote only by virtue of their shares.)

(c) Capital raised by issuing debentures is borrowed capital. It is a loan to the company, carries a fixed rate of interest and has to be repaid (redeemed) after a fixed period.