debenture redemption reserve

Definition

Amendment of the Indian Companies Act of 1956 made during the year 2000. Indian companies issuing debentures are required to create a redemption service to protect investors against default. The reserves are funded by company profits received on an annual basis until debentures are redeemed. For companies that fail to create reserves within a year of creating debentures, a 2% interest penalty is charged to debenture holders.

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