Question

Study the following case/situation and express your opinion.

Sunflower limited company proposes to issue debentures to the public to raise funds. After discussions, the Board of directors has decided to issue secured, redeemable, non-convertible debentures with o tenure of ten years. Please advise the Board on the following matters:

1. Should the company appoint a Debenture Trustee?
2. Should the company create a charge on its assets?
3. Can the tenure of debentures be less than ten years?

Answer 1

1. Yes. A Debentures trustee should be appointed by the company. This is because, in the preceding example, Rose Limited Company intends to raise funds by issuing public debentures. Thus. The debenture issuer must appoint one or more debenture trustees.
2. Yes. The corporation should impose a charge on tangible assets. The charge is created in the Debenture Trustee's favor, and they become the custodian of the assets on which the charge is created.
3. A corporation may issue secured debentures with redemption dates not exceeding ten (10) years from the date of issue.