Appointment of Debenture Trustee_Section 71(5) vs Rule 18(1)(c)

[Office Work]

Dear Members,

As per Section 71(5) No company shall issue a prospectus or make an offer or invitation to the public or to its members exceeding 500 for the subscription of its debentures, unless the company has, before such issue or offer, appointed one or more debenture trustees and the conditions governing the appointment of such trustees shall be such as may be prescribed.

However there is no limit of number of members as per Rule 18(1)(c) for appointment of debenture trustee.

So, if Company is issuing secured debenture to its 10 members, is it required to appoint debenture trustee or not?

Regards,

Pushkar 

[Office Work]

Sir

Thank you very much for your clarification.

On Wed, May 26, 2021, 18:21 Samarth Aggarwal <sam...@pnbisl.com> wrote:

Dear Puskar,

If the company is issuing of unlisted secured debentures on private placement basis the appointment of a debenture trustee does not seem to be mandatory unless debentures are issued to more than 50 persons or members exceeding 500. However it is compulsory in case of  Public issue of debentures or Listing of NCDs issued or to be issued on private placement basis and also in case where the subscribers of the securities (Debentures) makes it mandatory to appoint a debenture trustee.

Furthermore you may also have to check the regulation w.r.t appointment of debentures trustee as mandated by other regulators such as RBI , HFC Companies etc where they have been mandated to appoint DT even for a issuance of debentures having a maturity having less than one year.

Above views are intended to provide a general guide to the subject matter and are solely in personal nature. 

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Thanking you.

Yours sincerely

Samarth Aggarwal

Dy. Manager

Debenture Trustee

10, Rakesh Deep Building 

Yusuf Sarai Commercial Complex

Gulmohar Enclave

New Delhi - 110049

Mob: 07428130549

Tel: 011 41035054

Web:www.pnbisl.com

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[Jinal Doshi]

Dear Professionals,

is it mandatory to appoint debenture trustee in case of issue of unsecured NCD by Private Limited?

Regards,

CS Jinal Doshi

To view this discussion on the web visit https://groups.google.com/d/msgid/csmysore/CACzMoEM3OSyjmR1fLoMduzf1dPStfgcUFedx9yUTPW%3Dfp-hW5Q%40mail.gmail.com.

[Ronak Gupta]

No it is mandatory in the case.

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Thanks & Regards
Ronak Gupta
Company Secretary
Delhi
9910226715