Meaning of Secured Debentures: When a debenture is secured, it’s backed up by collateral. In other words, the lender receives a kind of insurance against the loan not being paid back. If the borrower defaults and can’t pay off their loan, the lender can redeem what is owed by acquiring the assets belonging to the borrower.
Applicable Section for the issuance of Secured Debentures: Section 71 of the Companies Act, 2013 read with rule 18 of the Companies (Share Capital and Debentures) Rules, 2014.
Procedure for the Issuance of Secured Debentures shall be discussed below:
If the Company intends to issue the Secured debentures then in such case, the Company should comply with the Procedure which is mentioned in the Section 71 of the Companies Act, 2013, read with the Applicable rules.
Step 1: Convene the Board Meeting and Pass the Board Resolution for authorizing issue of debentures and approval of Letter of Offer in form PAS-4.
Step 2: E-Form MGT-14 shall be filed by the Company within 30 Days of passing Board Resolution. (Note: Filing of E-Form MGT-14 is exempted in case of Private Companies).
Step 3: Convene the General Meeting and Pass the Special Resolution for issue and allotment of Debentures.
Step 4: Debenture Trustee should be appointed and the Consent of Debenture Trustee should be obtained.
Step 5: Letter of Offer should be circulated if the issue is by the way of Private Placement/Preferential Allotment. OR Prospectus should be circulated if the issue is by the way of Public Offer.
Step 6: E-Form MGT-14 shall be filed by the Company within 30 Days of passing Special Resolution by the Company.
Step 7: Again Convene the Board meeting and Pass the Board Resolution for Allotment of Debentures.
Step 8: E-Form MGT-14 shall be filed by the Company within 30 Days of passing Board Resolution by the Company for allotment of Debentures. (Note: Filing of E-Form MGT-14 is exempted in case of Private Companies).
Step 9: E-form PAS-3 (for Return of Allotment) shall be filed to the ROC within 30 Days of Allotment along with the required Attachments.
Step 10: Debenture Trust Deed in Form SH-12 should be executed.
Step 11: The Company should file E-Form CHG-9 for registration of Charge within 30 Days of creation of Charge with the required attachments.
Step 12: Debenture Redemption reserve should be created.
Step 13: Relevant entries should be made in Register of Debentures in Form MGT-2 within 7 days of Allotment.
Step 14: Debenture Certificates should be issued as per Section 46 & 56 of the Companies Act, 2013.
Step 15: Form PAS-5 (Record of Private Placement offer to be kept by the Company) is to be prepared by the Company.
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