Page 2 - LN REDEMPTION OF DEB

for a company to transfer 25% amount of nominal value of debentures

to be redeemed in DRR A/c before redemption of debentures
commence.

• Redemption out of profit: Redemption out of profit means that

adequate amount of

profits are transferred to DRR A/c from Statement of P/L before the

redemption of debenture commences. This reduce the amount available

for dividends to shareholders.

NOTE : If it is mentioned in question that redemption is out of capital

then DRR should also created with 25% of the nominal value of

debentures.

If it is mentioned that redemption is out of profit then DRR should be

created with the 100% of the nominal value of debentures.

If nothing is mention about the source of redemption than as per SEBI
guidelines 25% of nominal value of debentures is to be transferred to

DRR A/c.

Clarifications regarding creation of Debenture Redemption
Reserve (DRR)

The Department of Company Affairs, Government of India, vide their

circular No.9/2002, dated 18.04.2002 has issued the following
clarifications regarding creation of Debenture Redemption Reserve (DRR)-

• No DRR is required for debentures issued by All India Financial
Institutions, regulated by RBI and Banking Companies for both public

as well as privately placed debentures.

• No DRR is required in case of privately placed debentures.