Accounting for Shares, Issue of Rights and Bonus Shares, Buyback of Shares, Redemption of Preference Shares, Issue and Redemption of Debentures, Dibrugarh University, Corporate Accounting, B.Com 2nd Semester (CBCS) B.Com 1st Year, Notes Unit 1- Myedu365

Unit 1

Part A

Accounting for Shares

1. Explain the SEBI guidelines on issue of various classes of share and forfeiture of share?

Ans: Following are the SEBI guidelines for issue of fresh share capital:

1. All applications should be submitted to SEBI in the prescribed form.

2. Applications should be accompanied by true copies of industrial license.

3. Cost of the project should be furnished with scheme of finance.

4. Company should have the shares issued to the public and listed in one or more recognized stock exchanges.

5. Where the issue of equity share capital involves offer for subscription by the public for the first time, the value of equity capital, subscribed capital privately held by promoters, and their friends shall not less than 15% of the issued equity capital.

6. An equity-preference ratio of 3:1 is allowed.

7. Capital cost of the projects should be as per standard set with a reasonable debt-equity ratio.

8. New company cannot issue shares at a premium. The dividend on preference shares should be within the prescribed list.

9. All the details of the underwriting agreement.

10. Allotment of shares to NRI’s is not allowed without the approval of RBI.

11. Details of any firm allotment in favor of any financial institutions.

12. Declaration by secretary or director of the company.

Following are the SEBI guidelines for first issue by new companies in primary market:

1. A new company which has not completed 12 months of commercial operations will not be allowed to issue shares at a premium.

2. If an existing company with a 5 year track record of consistent profitability is promoting a new company, then it is allowed to price its issue.

3. A draft of the prospectus has to be given to the SEBI before public issue. 

4. The shares of the new companies have to be listed either with OTCEI or any other stock exchange.

Following are the SEBI guidelines for secondary market:

1. All the companies entering the capital market should give a statement regarding fund utilization of previous issue.

2. Brokers are to satisfy capital adequacy norms so that the member firms maintain adequate capital in relation to outstanding positions.

3. The stock exchange authorities have to alter their bye-laws with regard to capital adequacy norms.

4. All the brokers should submit with SEBI their audited accounts.

5. The brokers must also disclose clearly the transaction price of securities and the commission earned by them. This will bring transparency and accountability for the brokers.

6. The brokers should issue within 24 hours of the transaction contract notes to the clients.

7. The brokers must clearly mention their accounts details of funds belonging to clients and that of their own.

8. Margin money on certain securities has to be paid by claims so that speculative investments are prevented.

9. Market makers are introduced for certain scrip’s by which brokers become responsible for the supply and demand of the securities and the price of the securities is maintained.

10. A broker cannot underwrite more than 5% of the public issue.

11. All transactions in the market must be reported within 24 hours to SEBI.

12. The brokers of Bombay and Calcutta must have a capital adequacy of Rs. 5 lakhs and for Delhi and Ahmadabad it is Rs. 2 lakhs.

13. Members who are brokers have to pay security deposit and this is fixed by SEBI.

Following are the SEBI guidelines for Forfeiture of shares:

       A company has no inherent power to forfeit shares. The power to forfeit shares must be contained in the articles. Where a share holder fail to pay the amount due on any call, the directors may, if so authorized by the articles, forfeit his shares. Shares can only be forfeited for non- payment of calls. An attempt to forfeit shares for other reasons is illegal. Thus where the shares are declared forfeited for the purpose of reliving a friend from liability, the forfeiture may be set aside. 

Before the shares are forfeited the shareholders:

1. Must be served with a notice requiring him to pay the money due on the call together with interest;

2. The notice shall specify a date not being earlier than the expiry of 14 days from the date of service of notice, on or before which the payment is to be made and must also state that in the event of non-payment within that date will make the shares liable for forfeiture;

3. There must be a proper resolution of the board;

4. The power of forfeiture must be exercised bonafide and for the benefit of the company.

      A person, whose shares have been forfeited, ceases to be a member of the company. But he shall remain liable to pay to the company all money which at the date of forfeiture were payable by him to the company in respect of the shares. The liability of such a person shall cease as and when the company receives payment in full in respect of the shares.

2. What are the differences between public and private company?

Ans: Following are the differences between public and private company:

 (i) Minimum no. Of members:- The Minimum no of person required to form a public company is seven where as in a private company it is only two.

 (ii) Minimum no. Of members:- There is no maximum limit on members of a public company but a private company cannot have more than 50 members excluding employees and ex-employees of the company.

(iii) Restriction on name:- The name of a public company must end with the ward limited. But in the case of private company the ward private limited must be used at the end of the name.

 (iv) No. of its directors:-  The public company must have at least 3 directors where as a private company must have at least 2 directors.

(v) Commencement of business:- A public company can commence its business only after getting a certificate of commencement of business. But a private company can commence its business as soon as it is incorporated.

3.What are the difference between preference share and equity share?

Ans: Followimg are the differences between preference shares and equity shares:

Preference Share

Equity Share

(i) The rate of dividend on these shares is fixed.

(i) The rate of dividend of these shares is not fixed.

(ii) Dividend is paid before payment of dividend to equity share holder.

(ii) Equity dividend is paid only after payment to preference share holder.

(iii) Preference shares are repaid before payment of equity share holders.

(iii) Equity shares are paid only after payment of preference shareholders.

(iv) Voting right of preference shareholders are restricted.

(iv) Equity share holders enjoy voting rights.

(v) They do not have a right to participate in management of the company.

(v) They have full right to participate in management of the company

4. What is share capital? What are the types/ kinds / parts of share capital?

Ans: The amount required by the company for its business activities is raised by issue of shares, the amount so raised is called share capital of the company. The person who buys the shares of company is called shareholders.

Following are the Kinds/parts of share capital:-

(i) Authorised capital:- Authorised capital is the capital with which a company is registered and this amount is mentioned in the capital clauses of memorandum of association.

(ii) Issued capital:-  Issued capital is that portion of authorised capital for which offers have been invited for subscription.

(iii) Subscribed capital:- Subscribed capital represents that part of issued capital which has actually been subscribed and allotted to the public.

(iv) Called up capital: - Called up capital is that part of the subscribed capital for which the company actually demanded from the shareholders.

(v) Paid up capital: - Paid up capital is that part of the called up share capital which has been paid by the shareholders.

(vi) Reserve capital: Reserve capital is that portion of the subscribed capital which not been called up, and the company has, by special resolution, resolved that it can be called up only in the event of the winding up of the company.

5. What is reserve capital and capital reserve?

Ans: Capital Reserve: Capital reserve is that profit which has been made out of capital profit. The capital profit is not earned by company in normal course of business.

Reserve Capital:  Reserve capital is that portion of the subscribed capital which not been called up, and the company has, by special resolution, resolved that it can be called up only in the event of the winding up of the company.

6. What are the difference between reserve capital and capital reserve?

Ans: Following are the differences between reserve capital and capital reserve:

Reserve Capital

Capital Reserve

(i) It is the under uncalled portion of the share capital.

(i) It is part of capital profit which is not free for distributed as dividend.

(ii) It can be called up only in case of winding up.

(ii) It can be used during the whole life of the company.

(iii) It cannot be used to right of capital losses.

(iii) It can be used to write of capital losses.

(iv) Its creation is not compulsory.

(iv) It is compulsory in case of capital profit like profit for forfeited shares.

7. What is forfeiture of Shares?

Ans: Forfeiture of share means cancellation of shares held by the defaulting members . It leads to compulsory termination of membership of the defaulting shareholder by way of penalty for non payment of allotment or any call money and seizure of money already paid. 

8. State the procedure for forfeiture of share?

Ans:  A company must follow the following procedure for forfeiture of share:-

1.     Issue of notice:- A notice must be served on the defaulting shareholders asking them to pay the outstanding call money together with interest on the outstanding calls if any.

2.     Period of notice:- The notice must mention a future date on or before which payment must be made by defaulting shareholder. The date must not be earlier than fourteen days from the date of serving the notice.

3.     Contents of Notice:- The notice must state that the board of directors will forfeit the shares as stated in the notice if the required payment is not made within the prescribed date mentioned in the notice.

4.     Resolution on forfeiture:- If the defaulting shareholder fails  to comply with the requirement of the notice a resolution effecting the forfeiture of share must be passed in the meeting of the board of directors.

5.     Communication of forfeiture:- The fact of forfeiture of share must be  communicated to the shareholder  whose shares have been forfeited. A copy of the resolution of board of directors to this effect is generally sent along with the letter.

Forfeiture of a share will be valid if the above formalities ot the provision of the Articles are scrupulously observed. Any irregularity in this respect will make the forfeiture void. 

9.What is Re-issue of forfeited shares?

Ans: As per clause 31(1) of the table ‘F’ to the companies Act, 2012, forfeited share may be sold or otherwise disposed off on such manner as the board thinks fit.

     Clause 32(1) of the table ‘F’ gives absolute power to the board of directors regarding the reissue of forfeited shares. They have the right to reissue either whole or part of the shares forfeited. They have the authority to fix the terms and price of reissue of such shares. Hence, they can re-issue the forfeited shares at par or at a premium or at a discount.

 10. What is Sweat equity share?

Ans: The term sweat equity shares as defined in section 2(88) of the companies Act, 2013 means equity shares issued by the company to its directors or employees at discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

11. What are the differences between shares and stock?

Ans: Following are the differences between shares and stock:

1. Paid up category:- Stock are always fully paid up where as shares may or  may not be fully paid.

2. Direct Issue:- Share may be issued when a company is incorporated but stock cannot be issued under such circumstances.

3. Serial No.:- Stocks are not numbered, where as shares are serial numbered.

4. Fractional Transferred:- Stock is continued method of transferring because it can be issue or transferred in fractional parts whereas shares cannot be divided because the face value of each share fixed.

5. Registration:- Shares are always registered and not transferred by mere delivery but stock  may be registered or unregistered  and unregistered stock can be transferred by mere delivery.

12. Write short notes on Oversubscription and pro rata allotment.

Ans: When the number of shares applied is more than the number of shares issued by a company, the issue of shares is said to be oversubscribed. The company cannot allot shares more than those offered for subscription. In case of over subscription, there are three possibilities arise:

a. Some applicants may not be allotted any shares. This is known as rejection of applications.

b. Some applicants may be allotted less number of shares than they have applied for. This is known as partial or pro-rata allotment.

c. Some applicants may be allotted the full number of shares they have applied for. This is known as full allotment.

     In such a situation if shares are allotted in proportion of shares issued to shares applied, then such an allotment is called partial or pro-rata allotment. In such case, excess application money is transferred to allotment.


Part B
Issue of Rights and Bonus Shares

1. What do you mean by Bonus shares? Under what circumstances such shares are issued. Illustrate the SEBI guidelines regarding Bonus issue.

Ans: When a company wants to mobilize any portion of its accumulated profits, the company may issue bonus shares to its existing shareholders. Issue of bonus shares means issue of shares without any payment from its existing shareholders. Therefore the issue of bonus shares amounts to payment of dividend in kind i.e. in the form of shares issued without any cash payment from the accumulated reserves of the company. By issuing bonus shares, the company is able to follow the policy of retention of profits in the business. A bonus issue may be made out of the revenue and capital profits available with the company.

Circumstances for Issue of Bonus Shares:

a. When a company has accumulated large reserves and it wants to capitalize these reserves by issuing bonus shares.

b. When the company is not in a position to give cash bonus because it adversely affects its working capital.

c. When the value of fixed assets far exceeds the amount of the capital.

d. When the higher rate of dividend is not advisable for the distribution of the accumulated reserves because shareholders will demand the same rate of dividend in future which the directors may not be able to give.

e. When there is a big difference between the market value and paid up value of shares of the company i.e. market value of shares far exceeds the paid up value of shares.

SEBI guidelines for Issue of Bonus Shares:

a. The bonus issue is made out of free reserves built out of the genuine profits or securities premium reserve collected in cash only.

b. Reserves created by revaluation of fixed assets are not capitalized.

c. The declaration of bonus issue, in lieu of dividend, is not made.

d. The bonus issue is not made unless the partly paid shares, if any existing, are made fully paid-up.

e. The company has not defaulted in payment of interest or principal in respect of fixed deposits and interest on existing debentures or principal on redemption thereof and has sufficient reason to believe that it has not defaulted in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity bonus etc.

f. A company which announces its bonus issue after the approval of the Board of Directors must implement the proposal within a period of six months from the date of such approval and shall not have the option of changing the decision.

g. There should be a provision in the Articles of Association of the company for capitalization of reserves, and if not, the company shall pass a resolution at its general body meeting making provisions in the Articles of Association for capitalization.

h. Consequent to the issue of bonus shares if the subscribed and paid up capital exceed the authorized share capital, a resolution shall be passed by the company at its general body meeting for increasing the authorized capital.

i. The company shall get a resolution passed at its general body meeting for bonus issue and in the said resolution the management’s intention regarding the rate of dividend to be declared in the year immediately after the bonus issue should be indicated.

j. No bonus issue will be made which will dilute the value of rights of the holders of debentures, convertible fully or partly.

2. What are the differences between Bonus shares and Right shares?

Ans: Following are the differences between Bonus shares and Right shares:


Bonus Shares

Right Shares

1. Charges

Bonus shares are offered free of charge to the existing shareholders.

Right shares are offered at a discounted price for existing shareholders.

2. Purpose

Bonus shares are issued to compensate for the prevailing cash limitations.

Rights shares are issued to raise new capital for future investments.

3. Cash flow

Bonus shares do not result in cash receipt.

Rights shares result in cash receipt for the company.

4.Minimum subscription

There is no requirement of minimum subscription in case of bonus issue.

Minimum subscription is necessary in case of right issue.

5. Fully paid

Bonus share are always fully paid.

Right shares can be fully paid or partly paid.

3.What is Right Share? Explain the provisions of the law regarding issue of right share.

Ans: Meaning of Right Shares: Section 81(1) of the Companies Act, 1956 states that right shares are those shares which are issued after the original issue of shares but having an inherent right of the existing shareholders to subscribe to these shares in proportion to their holding. Such shares must be offered to the existing equity shareholders on pro rata basis.

    The offer of this type of shares shall be made in the form of a notice giving the particulars of shares offered and within 15 days from the date of the offer for acceptance of such offer. These shares can also be issued to the new members when the existing shareholders do not accept the offer within a period of 15 days or more.

Section 81(1) further states the provision regarding issue of Right Shares as:

a. Such new shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that date.

b. The offeree aforesaid shall be intimated by notice specifying the number of shares offered and limiting a time not being less than 15 days from the date of offer within which the offer, if not accepted, will be deemed to have been declined.

c. The offers of the shares may renounce the offers in favour of any of the persons unless the Articles of the company provide otherwise.

d. After the expiry of the time specified in the notice aforesaid or on receipt of earlier intimations from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner as they think most beneficial to the company. Shares issued under this section are called “Right” shares. But before issuing such shares the public company must follow the SEBI guidelines in the regard.


Part C
Buyback of Shares

1. What is Buy-back of shares? What are the objectives of Buy-back of shares? State the procedure of Buy-back of shares.

Ans: Buy-back of shares: Buy-back means the repurchase of its own shares by the company. When a company has substantial cash resources, it may like to buy its own shares from the market, particularly when the prevailing rate of its shares in the market is much lower than the book or what the company perceives to be its true value. This is known as buy back of shares. Buy back procedure thus enables a company to go back to the holders of its shares and offers to purchase from them the shares they hold. The shares thus bought back have to be cancelled.

Objectives/Purpose/Reasons of Buy Back: Shares may be bought back by the company on account of one or more of the following reasons:

a. To increase promoters share holding.

b. To increase earnings per share and return on equity.

c. Rationalize the capital structure by writing off capital not represented by available assets.

d. To support market price of the share of the company during periods to temporary weakness.

e. To utilize surplus cash not required by business.

f. To prevent hostile take-over bids.

Following are the procedure for Buy Back of shares:

a. where a company proposes to buy back its shares, it shall, after passing of the special/Board resolution make a public announcement at least one English National Daily, one Hindi National Daily and one Regional Language Daily at the place where the registered office of the company is situated.

b. The public announcement shall specify a date, which shall be “specified date” for the purpose of determining the names of shareholders to whom the letter of offer has to be sent.

c. A public notice shall be given containing disclosures as specified in schedule I of the SEBI regulations.

d. A draft letter of offer shall be filed with SEBI through a merchant banker. The letter of offer shall then be dispatched to the members of the company.

e. A copy of the Board resolution authorizing the buyback shall be filed with the SEBI and stock exchange.

f. The date of opening of the offer shall not be earlier than seven days or later than 30 days after the specified date.

g. The buyback offer shall remain open for a period of not less than 15 days and not more than 30 days.

h. A company opting for buyback through the public offer or tender offer shall open an escrow account.


Part D

Redemption of Preference Shares

1. Discuss the provisions of law with regard to redemption of Redeemable preference shares as laid down in section 55 of the companies Act, 2013.

Ans: Following important provisions regarding the redemption of preference shares are given under section 55 of the Companies Act, 2013.

1. Such shares cannot be redeemed unless they are fully paid up. In other words partly paid – up shares cannot be redeemed. This provision is made in order to protect the interest of the creditors.

2. Such shares can be redeemed either out of profits which would be available for dividend or out of the proceeds of a fresh issue of shares made with the object of redemption. These shares cannot be redeemed out of the proceeds of fresh issue of debentures or out of the sale proceeds of any property of the company as it will lead to erosion of available security to the creditors.

3. When shares are redeemed out of profits available for distribution as dividend, a sum equal to the nominal amount of the shares so redeemed must be transferred out of profits to a reserve account to be called ‘capital redemption reserve account’. This provision is made in order to immobilize profits from being used for any other purpose such as declaration of dividend, redemption of debenture etc.

4. Such reserve can be used for issuing fully paid bonus shares to the shareholders. This account cannot be reduced except in accordance with the sanction of the court relating to reduction of share capital.

5. Redemption of preference shares should not be regarded as a reduction of the authorized capital of the company and as such the reduced shares should remain part of the authorized capital and must be shown in the balance sheet.

      The purpose of all the legal restrictions on redemption of preference shares is not to allow redemption of preference shares which may adversely affect the security available to the creditors of company. The purpose is to keep the security intact which is available to the creditors even after the preference shares are redeemed. Section 55 of the Companies Act provides that redemption of preference shares can be made either out of the profits of the company which would be available for dividend or out of the proceeds of a fresh issue of shares.


Part E

Issue and Redemption of Debentures

1. What is Debenture? Write its Characteristics?

Ans:  A debenture is a written acknowledgement of debt by a company under its common seal, agreeing to repay the same after a specified period and to pay interest as regular intervals. The persons who invest their money by purchasing debentures of a company are called debenture holders.


1.      It is an acknowledgement of debt or loan taken by a company.

2.      It is issued in the form of certificate in written form to the lender.

3.      Its face value is pre- determined.

4.      It is issued under the common seal of the company.

5.      It does not carry voting rights like shares.

2. What are different types of debentures?

Ans: Following are the different types of debentures:

1. On the basis of securities:-

Secure debenture:- Secure/ mortgaged debenture are those debentures which are secured by a fixed or floating charges on the whole or part of the company’ asset.

Naked or Simple debenture:- It is not backed up any securities or guarantee either for payment of interest or for repayment of loan.

2. On the basis of period:-

a. Redeemable debenture:- It is to be paid off by the company after a stipulated period during the existence of the  company.

b. Irredeemable debenture:-  It is not repayable so long as the company continues to be in existence.

3. On the basis of Registration:-

a. Registered debenture:- It is those debenture where the name of the holder of such debenture appears in the debenture certificate issue by the company.

b. Bearer Debenture:- It is those debentures which are payable to the bearer or holders.

4. On the basis of convertibility:-

a. Convertible debenture:- It is those debentures the holders of which are given the option to get the debenture held by them concreted into shares or new debentures after a specified time as per the terms of  issue.

b. Non-Convertible debenture:- It is those debentures the holders of which do not have the options to get the debentures held by them continued into shares or new debentures. 

3. Write the difference between Share holder and debenture holders?

Ans: Following are the difference between Share holder and debenture holders:

Share Holder

Debenture Holder

1. The subscribes to the shares are shareholders. Shares are the part of the share capital or owned capital of company.

1. The subscribed to debenture are known as debenture holder. Debentures. Denature are part of the loan capital of the company.

2. They are the owner of the company.

2. They are the creditors of the company.

3. Shareholders are paid divided on their holdings.

3. Debenture holders are paid interest on the debenture held by them.

4. Shares are not secured.

4. Debentures are ordinarily secured on the asset of the company.

5. Share capital is not returned except in cash of preference share and buy back of share.

5. Debenture being loan is repaid by the company.

6. Dividend is paid when there is sufficient profit. The rate of dividend is not fixed on equity share.

6. Interest on debentures is paid at fixed rate at regular interval.

4. What are the differences between shares and debentures?
Ans: Following are the differences between shares and debentures: 



(i) Shares are the part of the owned capital.

(i) Debenture are the part of the loan capital.

(ii) Shares except sweat equity share cannot be issued at a discount u/s 53 of the company Act, 2013.

(ii) There is no such restriction on the issue of debenture at a discount.

(iii) Dividend on shares is distributed only when there is profit. The rate of dividend is fixed in case of preference share.

(iii) Interest to be paid on debenture have no relation to profit. It is paid even when there is loss. It is charge on profit of the company.

(iv) Shares are the part of capital. So these do not have any security.

(iv) Sometimes debenture are issued on the mortgage of some property. Hence the debentures may be secured.

(v) Shares continue during the complete life time of the company.

(v) Normally, debenture re repaid during the life time of the company.

(vi) Shareholders have the last priority of payment at time of liquidation.

(vi) Debenture holders have the priority of payment over share holder at the time of liquidation


5. What is Redemption of Debentures? What are the different methods of Redemption of Debentures?

Ans: It means the repayment of debentures. As debenture is shown in the liability side of balance sheet it is necessary for the company to discharge these liabilities. Thus redemption of debentures denotes discharge of liability on account of debentures by repayment to the debenture holders. The redemption is made on the expiry of specified period mentioned in the debenture certificates.

Following are the methods of redemption of debenture:-

(i) By payment in  lump sum at the end of fixed period:  Redemption of debenture by making payment in lump sum at the end of the fixed period means redemption of the whole of the debentures on a fixed date by making payment at a time to the  debenture holders.

(ii) Redemption in instalments: - Redemptions in instalment means that all the debentures are not redeemed on a particular date. Instead when the company decides to redeem only a part of the total debenture annually on a particular date and whole of the debenture are redeemed within the fixed period from the data of issue of debentures.

(iii) Redemption by purchase in open market: - Sometimes debentures of some companies are quoted on the stock exchanges. When the price of such debentures quoted in the stock exchange is lower than the  amount agreed to be  paid  by the company at the time of redemption as per the terms of issue, the company  may discharge it liabilities in the respect  of such debentures by purchasing them from the open market.

(iv) Redemption by Conversion into shares:- Sometimes a company may issue fully convertible debenture(FCD)/ partly convertible debenture (PCD) i.e. the debentures are either fully/partly convertible into shares. If such debenture are converted into shares, it means that the debentures have been redeemed to the extent of conversion into shares.

6. State SEBI guidelines for issue of debenture?

Ans: Following are the SEBI guidelines for issue of debenture:

Section F: Under SEBI guidelines following points are laid down relating to issue of various kinds of debentures such as fully convertible, partially convertible and Non-convertible debentures:

1. Issue of FCDs having a conversion period of more than 36 months will not be permissible, unless conversion is made optional with put and call option.

2. Compulsory credit rating will be required if conversion is made for FCDs after 18 months.

3. Premium amount on conversion, time of conversion, in stages, if any, shall be predetermined and stated in the prospectus. The interest rate for above debentures will be freely determinable by the issuers.

4. Issue of debentures with maturity of 18 months or less exempt from the requirement of appointment of debenture trustee or creating debenture redemption reserve (DRR).

5. Any conversion in part of whole of the debenture will be optional at the hands of the debenture holder, if the conversion takes place at or after 18 months from the date of allotment, but before 36 months.

6. In case of NCDs/PCDs credit rating is compulsory where maturity exceeds 18 months.

7. Premium amount at the time of conversion for the PCD shall be predetermined and stated in the prospectus. Redemption amount, period of maturity; yield on redemption for the PCDs/NCDs shall be indicated in the prospectus.

8. The discount on the non-convertible portions of the PCD in case they are traded and procedure for their purchase on spot trading basis must be disclosed in the prospectus.

9. In case, the non-convertible portions of PCD/NCD are to be rolled over with or without changes in the interest rate, a compulsory option should be given to those debenture holders who want to withdraw and encash from the debenture programme.

10. Before roll-over of any NCDs or non-convertible portion of PCDs, fresh credit rating shall be obtained within a period of six months prior to the due date of redemption and communicated to debenture holders before roll-over and fresh trust deed shall be made.

11. Letter of information regarding roll-over shall be vetted by SEBI with regard to the credit rating, debenture holder’s resolution, option for conversion and such other items which SEBI may prescribe from time to time.

12. The disclosures relating to raising of debentures will contain, amongst other things, the existing and future equity and long term debt ratio servicing behavior on existing debentures, payment of due interest on due dates on term loans and debentures certificate from a financial institution or bankers about their no objection for a second charge being created in favour  of the trustees to the proposed debenture issues. 

13. SEBI may prescribe additional disclosure requirements from time to time after due notice.