What is the redemption of debenture?
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.
What is meant by redemption of shares?
Redemptions are when a company requires shareholders to sell a portion of their shares back to the company. For a company to redeem shares, it must have stipulated upfront that those shares are redeemable, or callable.
What are 2 methods of redemption of shares?
Methods of Redemption of Preference Shares
- Redemption out of Profits.
- Redemption out of Fresh Issue.
- Combination of Both.
What are the conditions for redemption of debentures?
PROVISIONS/ CONDITIONS FOR REDEMPTION OF DEBENTURES
- CREATION OF DEBENTURE REDEMPTION RESERVE.
- INVESTMENT IN SPECIFIED SECURITIES BY 30TH APRIL.
- ENCASHMENT OF INVESTMENT IN SPECIFIED SECURITIES.
- USE OF DRR.
- OBLIGATION TO CREATE DRR.
- COMPANIES EXEMPTED FROM CREATING DRR.
- REDEMPTION AFTER STIPULATED TIME PERIOD.
What are the methods of redemption?
Methods of Redemption of Debentures
- Lump-sum payment on a prefixed date. This one-time method is considered to be among the simplest redeeming options.
- Payment in annual instalment.
- Debenture redemption reserve.
- Call and put option.
- Conversion into shares.
- Buy from the open market.
What is redemption of preference shares?
Redemption of preference shares means repayment by the company of the obligation on account of shares issued. According to the Companies Act, 2013, preference shares issued by a company must be redeemed within the maximum period (normally 20 years) allowed under the Act.
What is redemption in investment?
Redemption is the return of an investor’s principal on a fixed income security such as a bond, mutual fund or preferred stock.
What are methods of redemption?
What is the procedure for redemption?
If there is premium payable on redemption it must have provided out of profits or out of shares premium account before the shares are redeemed. 5. When shares are redeemed out of profits a sum equal to nominal amount of shares redeemed is to be transferred out of profits to the capital redemption reserve account.
How do you calculate redemption of preference shares?
(a) At first, calculate the amount paid to the preference shareholders (without premium), i.e., Capital sum/Principal amount. (b) Deduct the amount taken from General Reserve/Profit & Loss Account for Capital Redemption Reserve Account. (c) Balance left should be the required funds to be met from fresh issue at par.
What happens to debentures at the time of redemption?
A company may opt to not pay the debenture holders at the time of redemption. Instead of that, it can convert the debentures into a new class of debentures or even equity shares. Such debentures are known as convertible debentures. Such new debentures or shares can be issued at par, premium or even discount.
What is the minimum amount required to redeem debentures?
According to section 74 (4) of the Company’s Act, 2013 and Rule 18 (7) of the Companies (Share Capital and Debentures) Rules, 2014, a Company is required to transfer an amount equal to at least 25% of the value of debentures to the Debenture Redemption Reserve a/c before redemption of debentures.
What are the terms of issue of debentures?
The terms of issue of debentures provided they were redeemable at a premium of 5% and also conferred option to the debenture- holders to convert 20% of their holding into equity shares at a predetermined price of Rs. 15.75 per share and receive the payment in cash for the remaining debentures.
How to circulate new shares or debentures?
These new shares or debentures can be either circulated at a premium, at a discount or at par. It may be noted that this method is applicable only to convertible debentures. DRR is a reserve created out of profits for redeeming debentures.