Chapter No. 7 (Correspondence with Debentureholders)

 A. Who are Debenture Holders?

Debenture holders are the people who lend money to a company by purchasing its debentures.

In other words:

• They are creditors of the company.
• They do not have ownership in the company.
• They receive a fixed rate of interest, even if the company makes a profit or loss.
• They give loan to the company.
• They get interest at a fixed rate and at fixed intervals.
• They get back their principal amount on maturity (redemption).
• They cannot vote in company meetings because they are not owners.
• Their money is secured by company assets in case of secured debentures.

B. Correspondence with Debenture holders

In a company, debenture holders are the people who lend money to the company.
Whenever the company needs to communicate with them in writing, it is called correspondence with debenture holders.

C. Why correspondence is required?

A company may need to send letters/notices to debenture holders for:

1. Issue of Debentures

·       Informing them about the issue of new debentures

·       Sending application forms

·       Giving details like interest rate, maturity, security, etc.

2. Allotment of Debentures

·       Sending Allotment Letter

·       Confirming the number of debentures allotted

·       Giving payment schedule instructions

3. Payment of Interest

·       Sending Interest Payment Notice

·       Intimation of due date

·       Mode of payment

4. Redemption of Debentures

·       Redemption Notice informing that the debentures will be repaid

·       Giving redemption amount and date

5. Conversion of Debentures

·       If the company offers conversion into equity shares

·       Sending Conversion Offer Letter

6. Transfer / Transmission of Debentures

·       Communication for transfer requests

·       Asking for missing documents

·       Sending approval or rejection letters

7. Issue of Duplicate Debenture Certificate

·       When debenture certificate is lost

·       Acknowledgement of request

·       Asking for indemnity bond

·       Sending duplicate certificate letter

8. Queries and Complaints

·       Replying to debenture holder’s concerns

·       Interest not received

·       Certificate not received

·       Change of address, etc.

D. Precautions while Corresponding with Debenture Holders

1. Use of Formal and Polite Language

The secretary must use formal, respectful and clear language because debenture holders are creditors of the company.

2. Accuracy of Information

All details like interest amount, due date, redemption date, certificate number, debenture number must be correct.

3. Clarity and Simplicity

The message should be simple and easy to understand, avoiding technical or confusing words.

4. Prompt Reply

The secretary must reply quickly to any enquiry, complaint or request from debenture holders.

5. Confidentiality

Personal and financial information of debenture holders must be kept confidential.

6. Use of Standard Format

Letters such as allotment letters, interest notices, redemption notices must follow the company’s standard format.

7. Legal Compliance

Ensure that communication follows:

·       Companies Act, 2013

·       SEBI guidelines

·       Terms of the Debenture Trust Deed

8. Attach Required Documents

Include necessary enclosures like application forms, interest warrants, acknowledgement slips, etc.

9. Polite Handling of Complaints

Any issue such as interest not received, certificate lost, wrong entry should be handled politely and with responsibility.

10. Proofreading

Check spelling, numbers, dates, signatures, and attachments before sending the letter.

E. Circumstances for Correspondence with Debenture holders

1. Issue of Debentures

When the company issues new debentures, the secretary sends:

·       Issue letters

·       Prospectus / application forms

·       Terms and conditions

2. Allotment of Debentures

The secretary informs debentureholders about:

·       Number of debentures allotted

·       Allotment letter

·       Payment schedule

3. Payment of Interest

Correspondence is needed for:

·       Sending interest payment notices

·       Informing due dates

·       Clarifying delays or non-receipt of interest

4. Redemption of Debentures

The secretary sends:

·       Redemption notice

·       Maturity date

·       Amount payable

·       Mode of repayment

5. Conversion of Debentures

When convertible debentures can be converted into shares, the secretary informs:

·       Conversion option

·       Procedure

·       Time limit for conversion

6. Transfer or Transmission of Debentures

Communication is required for:

·       Transfer requests

·       Approval/rejection letters

·       Missing documents

·       Transmission due to death of holder

7. Issue of Duplicate Debenture Certificate

If original certificate is lost or damaged, the secretary sends:

·       Acknowledgement of request

·       Requirements like indemnity bond

·       Issuing the duplicate certificate

8. Change in Registered Details

Correspondence is required for:

·       Change of address

·       Change of bank details

·       Change of nominee

·       Correction of name or spelling

9. Handling Enquiries and Complaints

The secretary replies to issues like:

·       Non-receipt of interest

·       Non-receipt of certificate

·       Wrong entries

·       Delay in redemption

10. General Notices & Circulars

For any important information such as:

·       Meeting notices (if required)

·       Changes in terms

·       Communication from debenture trustee