Question

Assertion (A): In case of an unlisted company on a stock exchange, it is necessary to create debenture redemption reserve equivalent to at least 10% of debentures outstanding before commencement of redemption.

Reason (R): Debenture Redemption Reserve must be created even if debentures are redeemed through conversion.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are true, but (R) is not the correct explanation of (A).

• Both (A) and (R) are true and (R) is the correct explanation of (A).

• Both (A) and (R) are false.

• (A) is true, but (R) is false.

Answer 1

(A) is true, but (R) is false.

Explanation:

Assertion (A) is true because unlisted companies must create a Debenture Redemption Reserve (DRR) equal to at least 10% of outstanding debentures before redemption. Reason (R) is false because DRR is not required if debentures are redeemed through conversion.