Explain the guidelines of SEBI for creating a Debenture Redemption Reserve.


Kishore V, SME and ACW at Edumarz

The Securities and Exchange Board of India (SEBI) has issued certain recommendations for debenture redemption. The following are the main points of these guidelines: 

  • In the event that a business issues a debenture that is redeemable after more than 18 months from the date of issuance, the firm must establish a Debenture Redemption Reserve.
    (ii) Only non-convertible debentures and a non-convertible component of partly convertible debentures are required to establish a Debenture Redemption Reserve:
    (iii) Before beginning the redemption of a debenture, a firm must establish a Debenture Redemption Reserve equal to at least 50% of the debenture issuance amount.
  • (iv) Withdrawal from the Debenture Redemption Reserve is only permitted when the corporation has decreased the debenture indebtedness by 10%.
    The following conditions are exempt from SEBI guidelines:
    An infrastructure firm (one that is entirely dedicated to the development, maintenance, and operation of infrastructure facilities); and (ii) a company that issues debentures having a maturity of fewer than 18 months.

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