Board of directors of Prince Ltd. decides to go for the issue of secured debentures of ₹100 each, to the extent of ₹10 crore. Further, as the company is going for the issue of secured debentures, it is required to create

Section 71 read with Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 deals with issue of Debentures. Conditions to be satisfied for issue of secured debentures: According to Section 71(4) where debentures are issued by any company under this section, the company shall create a debenture redemption reserve account out of the profits of the company available for payment of dividend and the amount credited to such account shall not be utilized by the company except for the redemption of debentures. The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below: The Debenture Redemption Reserve shall be created out of the profits of the company available for payment of dividend. The company shall create Debenture Redemption Reserve in accordance with the following conditions: No DRR is required for debentures issued by All India Financial Institutions regulated by RBI and Banking Companies for both public as well as privately placed debentures. For other Financial Institutions within the meaning of clause (72) of Section 2 of the Companies Act, 2013, DRR will be as applicable to NBFCs registered with RBI. For NBFCs registered under Section 45-IA of the RBI (Amendment) Act, 1997, the adequacy of DRR will be 25% of the value of debentures issued through public issue as per present SEBI (Issue and Listing (Issue and Listing of Debt Securities) Regulations, 2008 and no DRR is required in the case of privately placed debentures. For other companies including manufacturing and infrastructure companies, the adequacy of DRR will be 25% of the value of debentures issued through public issue as per present SEBI (Issue and Listing of Debt Securities) Regulation 2008 and also 25% DRR is required in case of privately placed debentures by listed company. For unlisted companies issuing debentures on private place basis, the DRR will be 25% of the value of debentures. Further every company required to create Debenture Redemption Reserve shall on or before the 30th day of April in each year, invest or deposit, as the case may be, a sum which shall not be less than fifteen percent, of the amount of its debentures maturing during the year ending on the 31st day of March of the next year, in any one or more of the following methods, namely:- in deposits with any scheduled bank, free from any charge or lien; in unencumbered securities of the Central Government or of any State Government; in unencumbered securities mentioned in sub-clauses (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882; in unencumbered bonds issued by any other company which is notified under sub-clause (f) of section 20 of the Indian Trusts Act, 1882; The amount invested or deposited as above shall not be used for any purpose other than for redemption of debentures maturing during the year referred above: Provided that the amount remaining invested or deposited, as the case may be, shall not at any time fall below fifteen percent of the amount of the debentures maturing during the year ending on the 31st day of March of that year;