What is the minimum statutory amount to be transferred to debenture redemption reserve?
The amount of transfer should be calculated as follows: ten per cent of the outstanding debentures (till 15.08. 2019 it was 25%) less the amount available in the DRR. For HFCs and NBFCs, the rate used will be15% instead of 10%.
Is it mandatory to create debenture redemption reserve?
As per the notification of MCA dated 16th August 2019, a Debenture Redemption Reserve is not required for privately placed debentures by NBFCs registered with RBI under Section 45-IA of the Reserve Bank of India Act, 1934 and Housing Finance Companies registered with the National Housing Bank.
What are the Sebi guidelines regarding debenture redemption reserve?
10.3 Creation of Debenture Redemption Reserves(DRR)
- Company shall create DRR equivalent to 50% of the amount of debenture issue before debenture redemption commences.
- Drawl from DRR is permissible only after 10% of the debenture liability has actually been redeemed by the company.
Under which head is the debenture redemption reserve shown in the balance sheet?
Reserve and Surplus
The Debenture Redemption Reserve is shown on the Liabilities side of the Balance Sheet under the head Reserve and Surplus.
How is DRR calculated?
To calculate your DRR, you take the rate of revenue you pulled in at the beginning of a time period, and compare that to the rate of revenue you pulled in at the end of the time period specifically for those customers that were with you at the beginning of the time period.
What is debenture redemption?
Redemption of Debentures means repayment of the amount of. debentures to the debenture holders. It implies of the principle amount as well as interest due on. debentures to the debenture holders. In other words, it refers to the discharge of liability on debentures.
Which companies have no requirement of creating debenture redemption reserve?
And companies falling under the following four categories are altogether exempt from DRR requirements: All India Financial Institutions (AIFIs) regulated by Reserve Bank of India (RBI) Other financial institutions regulated by RBI. Banking companies for both public and privately-placed debentures.
Is it compulsory to maintain a debenture redemption reserve what are the provisions under Companies Act 2013 in this regard?
Mandatory Requirements On issue of debenture, a Company shall create a Debenture Redemption Reserve (DRR) out of the profits of the company available for payment of dividend and the amount credited to such account shall not be utilised by the company except for the redemption of debentures.
What can be the maximum time of conversion of debentures?
With the amendment made in the year 2016, the time period has increased from 5 years to 10 years. As per the guideline issued by the Reserve Bank of India, the compulsorily convertible debentures are considered as equity shares under a financial statement.
What is the minimum application money prescribed by SEBI?
The minimum share application money is 5% of the nominal value. The money received by the company when it issues shares to the public is known as application money.
Are debentures liabilities or equity?
Debenture bonds are liabilities of the company because they represent debts that will have to be repaid in the future.
Are debenture holders creditors?
A person having the debentures is called debenture holder whereas a person holding the shares is called shareholder. A shareholder or member is the joint owner of a company; but a debenture holder is only a creditor of the company.
What is a debenture redemption reserve account?
Where debentures are issued by a company under this section, the company shall create a debenture redemption reserve account out of the profits of the company available for payment of dividend and the amount credited to such account shall not be utilised by the company for any purpose other than the redemption of debentures.
Do companies need to arrange funds for debenture redemption?
Companies are not required to arrange funds for the debenture redemption reserve just after issuing the debenture. They are allowed to credit funds into the DDR account by an adequate amount each year until the maturity date. There are several methods by which the redemption of debentures can take place.
How long can a company issue secured debentures?
(Provided that the certain classes of companies may issue secured debentures for a period exceeding ten years but not exceeding thirty years) The company shall create Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below-
How are debentures credited to the DDR account?
They are allowed to credit funds into the DDR account by an adequate amount each year until the maturity date. There are several methods by which the redemption of debentures can take place. Each method follows a unique accounting treatment.