Maharashtra Board Class 12 Secretarial Practice Chapter 7 Correspondence With Debentureholders PDF Download

Correspondence With Debentureholders

Introduction

The capital of a company is raised by issuing shares or debentures to the public. The share capital is the owned capital while Debenture Capital is the borrowed capital of a company.

Debenture is an acknowledgement of a debt. Debenture capital is a borrowed capital of a company. Debentureholder is a creditor of the company. Compared to equity shares Debenture is considered as safe and secured capital. Debentures are issued for a specific period and it carries fixed rate of interest as a return on investment in debentures.

The Secretary has to communicate the decisions of the management and other information to the Debentureholders by conducting correspondence. He should be very cautious and careful while corresponding with debentureholders of the company.

Certificate of Debenture should be issued within a period of 6 months from the date of allotment of debentures.

A Company cannot issue debentures to more than 500 people without appointing a Debenture Trustee.

Teacher's Note

Debentures are like loans that companies take from the public. Just like when you borrow money from your friend, the company promises to return the money with interest.

Exam Trick

Remember: Debentureholder = Lender = Creditor. They give money to the company, so they are like the bank!

Points to Remember

Debenture is borrowed money, not owned money.
Debentureholders are creditors of the company.
They get fixed interest every year, no matter if the company makes profit or not.
Certificate must be given within 6 months of giving debentures.
For more than 500 debentureholders, a Debenture Trustee must be appointed.

Precautions To Be Taken By The Secretary While Corresponding With Debentureholders

The following precautions are to be kept in mind by the Secretary while corresponding with the debentureholders.

1. Politeness (Courtesy): Being the creditors, due respect should be given to the debentureholder in secretarial correspondence. The tone of language in the letter should be courteous. Rude and harsh language should be strictly avoided.

2. Prompt Response: The Secretary should promptly reply and respond to the queries and complaints of the debentureholders without any delay.

3. Legal Provisions: The Secretary should follow the statutory provisions of the Companies Act and other relevant laws while corresponding with debentureholders. Secretary should be cautious and careful while corresponding with debentureholders on legal matters.

4. Transparency: To maintain greater transparency with debentureholders, it is necessary to disclose all correct and accurate information of the company, credit rating of the company, true and real facts of companies affairs, etc. in correspondence.

5. Conciseness: The letter to the debentureholders should be concise i.e. brief, short and to the point. Unnecessary and irrelevant information must be avoided.

6. Precise Information: The Secretary should provide precise and up to date information to the debentureholders. The information must be factual and true.

7. Secrecy: As a confidential officer of the company, secretary should not disclose any important and secret information related to the company while corresponding with debentureholders.

8. Image and Goodwill of the company: While corresponding with debentureholders, the Secretary should always try to maintain goodwill and create a good image of the company in the mind of debentureholders.

Teacher's Note

When writing letters to debentureholders, be polite and helpful. Think of them like customers who gave you money. You want to keep them happy!

Exam Trick

Remember: PRECAUTIONS = Politeness, Response, Compliance, Transparency, Conciseness, Precision, Secrecy, and good Image. Use the first letters to remember!

Points to Remember

Always use polite and courteous language in letters.
Answer their questions quickly without delay.
Follow all the rules and laws of the company.
Tell them true and correct information about the company.
Keep letters short and to the point.

Circumstances Under Which A Secretary Has To Enter Into Correspondence With Debentureholders

The following are the few circumstances under which the Secretary enters into correspondence with the debentureholders.

1. Informing the applicant about allotment of debentures.

2. Informing about Payment of Interest though:

a) Interest Warrant

b) Electronic Payment of Interest

3. Letter for conversion of debentures into equity shares.

4. Letter for redemption of debentures.

Teacher's Note

A secretary writes letters to debentureholders four times: when giving them debentures, when paying them interest, when converting debentures to shares, and when returning their money at the end.

Exam Trick

Remember: Allotment, Interest, Conversion, Redemption. These are the four main times you write to debentureholders!

Points to Remember

When someone buys debentures, send them an allotment letter.
When they get interest money, send them an interest warrant.
If debentures can become shares, tell them in a conversion letter.
When the time is up, send them a redemption letter with their money back.

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