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9

C H A P T E R

Joint Stock Company—

Redemption of Debentures

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Redemption of Debentures
Redemption of Debentures means repayment of the amount of debentures.

2. Debentures Redemption Reserve (DRR)
It is a reserve set aside of profits available for payment as dividend for the purpose of redemption
of debentures.
It is created for Non-convertible Debentures (NCD) and Non-convertible part of Partly Convertible Debentures
(PCD).
3. Debentures Redemption Investment (DRI)
It is an investment made by a company on or before 30th April of the current year of an amount that is
at least equal to 15% of the nominal value of debentures to be redeemed by 31st March of next year.
4. Redemption of Debentures out of Capital
When profits are not transferred from Surplus, i.e., Balance in Statement of Profit and Loss to Debentures
Redemption Reserve (DRR) before the redemption of debentures, such redemption is Redemption of
Debentures out of capital.

5. Redemption of Debentures out of Profits
When adequate profits are transferred from Surplus, i.e., Balance in Statement of Profit and Loss to
Debentures Redemption Reserve (DRR) before redemption of debentures, such redemption is Redemption
of Debentures out of profits.
6. Redemption of Debentures in Lump Sum
It means all the debentures are redeemed at the date specified for redemption of debentures.

7. Redemption in Instalment by Draw of Lots
It means redemption of debentures (selected by lottery) at the specified date.
8. Redemption by Purchase from Open Market
When a company purchases its own debentures from open market for the purpose of cancellation, such
an act of purchasing and cancelling the debentures is redemption by purchase from open market. The
company may purchase its own debentures from the open market with the objective of (i ) immediate
cancellation, or (ii ) as investments.