Question -
Answer -
These points need to be followed while creating Debenture Redemption Reserve (DRR):
1. DRR needs to be created for companies whose issue debenture with maturity of more than 18 months.
2. For partly convertible debentures, DRR needs to be created for non-convertible portion of debenture in the same way as is done for fully non-convertible debenture issue.
3. Company should create DRR equivalent to 50% of debenture issue before debenture redemption commences.
4. Withdrawal from DRR is permissible only after 10% on the debenture liability has been actually redeemed by the company.
As per SEBI’s guidelines the following type of companies will be exempted from creating DRR:
1. Company issuing debentures with a maturity up to 18 months.
2. Companies involved in infrastructure sector like maintenance, construction, business development activities