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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956

Sec117B    -     Appointmentof debenture trustees and duties of debenture trustees.


No company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless the company has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustee or trustees have given their consent to the company to be so appointed. 

Provided that no person shall be appointed as a debenture trustee, if he -


beneficially holds shares in the company;


is beneficially entitled to moneys which are to be paid by the company to the debenture trustee;


has entered into any guarantee in respect of principal debts secured by the debentures or interest thereon.



Subject to the provisions of this Act, the functions of the debenture trustees shall generally be to protect the interest of holders of debentures (including the creation of securities within the stipulated time) and to redress the grievances of holders of debentures effectively.



In particular, and without prejudice to the generality of the foregoing functions, a debenture trustee may take such other steps as he may deem fit -


to ensure that the assets of the company issuing debentures and each of the guarantors are sufficient to discharge the principal amount at all times;


to satisfy himself that the prospectus or the letter of offer does not contain any matter which is inconsistent with the terms of the debentures or with the trust deed;


to ensure that the company does not commit any breach of covenants and provisions of the trust deed;


to take such reasonable steps to remedy any breach of the covenants of the trust deed or the terms of issue of debentures;


To take steps to call a meeting of holders of debentures as and when such meeting is required to be held.



Where at any time the debenture trustee comes to a conclusion that the assets of the company are insufficient or are likely to become insufficient to discharge the principal amount as and when it becomes due, the debenture trustee may file a petition before the Company Law Board and the Company Law Board may, after hearing the company and any other person interested in the matter, by an order, impose such restrictions on the incurring of any further liabilities as the Company Law Board thinks necessary in the interests of holders of the debentures.



Last updated on May, 2015

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