Issue of Debentures Notes2

Study Material & Notes for the Chapter 9

COMPANY - ISSUE OF DEBENTURES

II.  ISSUE OF DEBENTURES FOR CONSIDERATION OTHER THAN CASH

A. On Purchase of Assets
  • Where a company has purchased assets from a vendor and enters into an arrangement with the said vendor that instead of settlement of his dues in cash, the vendor agrees to accept fully paid debentures of the company issued to them. 
  • These debentures can be issued at par, at premium or discount and the number of debentures to be issued will depend upon the price at which the debentures are issued and the amount payable to the vendor
  • The number of debentures issued to the vendor will be calculated as = Amount Payable/Issue Price
debenture issue 2_1.1
B. On Purchase of Business
  • Where a company purchases business of another entity and enters into an arrangement with the said entity that instead of settlement of their dues in cash, the owners of the entity agrees to accept fully paid debentures of the company issued to them. 
  • These debentures can be issued at par, at premium or at discount and the number of debentures to be issued will be calculated as Purchase Consideration Amount/Issue price
C. Issue of Debentures to Promoters
  • Sometimes debentures are issued to the promotors of the company in lieu of the services provided by them during the incorporation of the company.
D. Issue of Shares to Underwriters
  • The Company enters a contract with a person know an Underwriter who takes the shares in his own name which are not subscribed by the public.  The Underwriter charges a commission for his servicers.