Page 3 - LN REDEMPTION OF DEB

• Section 117C will apply to debentures issued and pending to be

redeemed and, therefore, DRR will also be created for debentures
issued prior to 13.12.2000 and pending redemption.

• Section 117C will apply to non-convertible portion of debentures issued

whether they are Fully or partly paid.

Debenture Redemption Reserve : Debenture redemption reserve is a

reserve representing retentions out of profit made for the purpose of

redemption of debentures. Amount of DRR to be created : Section 117 (c)

of the Indian Companies Act 1956 requires that, an adequate amount of
profit should be transferred to DRR beforeredemption commences.

However the adequate amount is not specified by the companies Act.

SEBI has issued guidelines for the redemption of debentures

where by :

An amount equivalent to 50% of the amount of debentures issue must be

transferred to DRR before redemption of debentures commences.

This provision is applicable for non-convertible debentures or non-
convertible part of party convertible debentures.

After all the debentures are redeemed, this account is closed by

transferring to general reserve account.

Exception to the creation of DRR as per SEBI guidelines:

• All infrastructure companies, wholly engaged in the business related to

development maintenance and operation of infrastructure facilities.

• A company issuing debentures maturity period of not more than 18

months.
• Debentures issued by Banking Companies.

• Companies issuing privately placed debentures.