Provisions relating to creation of Debenture Redemption Reserve stand changed

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In the Companies (Share Capital and Debentures) Rules 2014, which was made available on the website of the official gazette on 3rd May 2014, MCA has changed the requirement of creating Debenture Redemption Reserves as opposed to what was mentioned in the final rules issued by it initially.

The text of relevant portion under both the rules are mentioned below:

Notified Rule:

“18 (7) The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below-



    (a) the Debenture Redemption Reserve shall be created out of the profits of the company available for payment of dividend;
    (b) the company shall create Debenture Redemption Reserve (DRR) in accordance with following conditions:-
      1. No DRR is required for debentures issued by All India Financial Institutions (AIFIs) regulated by Reserve Bank of India and Banking Companies for both public as well as privately placed debentures. For other Financial Institutions (FIs) within the meaning of clause (72) of section 2 of the Companies Act, 2013, DRR will be as applicable to NBFCs registered with RBI.
      2. For NBFCs registered with the RBI under Section 45-IA of the RBI (Amendment) Act, 1997, ‘the adequacy’ of DRR will be 25% of the value of debentures issued through public issue as per present SEBI (Issue and Listing of Debt Securities) Regulations, 2008, and no DRR is required in the case of privately placed debentures.
      Read more at Companies Act 2013 website

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