DEBENTURE REDEMPTION RESERVE

Added provision in the Indian Companies Act of 1956 in an amendment in 2000. It states that any Indian company that issues debentures must create a debenture redemption service to protect investors against the possibility of default by the company. Under the provision, debenture redemption reserves will be funded by company profits every year until debentures are to be redeemed. If a company does not create a reserve within 12 months of issuing the debentures, they will be required to pay 2% interest in penalty to the debenture holders. Only debentures that were issued after the amendment in 2000 are subject to the debenture redemption service.

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