Debenture Redemption Reserve

AAA

DEFINITION of 'Debenture Redemption Reserve'

A provision that was added to the Indian Companies Act of 1956 during an amendment in the year 2000. The provision states that any Indian company that issues debentures must create a debenture redemption service to protect investors against the possibility of default by the company.

INVESTOPEDIA EXPLAINS 'Debenture Redemption Reserve'

Under the provision, debenture redemption reserves will be funded by company profits every year until debentures are to be redeemed. If a company does not create a reserve within 12 months of issuing the debentures, they will be required to pay 2% interest in penalty to the debenture holders. Only debentures that were issued after the amendment in 2000 are subject to the debenture redemption service.

RELATED TERMS
  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders. ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  4. Debenture

    A type of debt instrument that is not secured by physical assets ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Default Risk

    The event in which companies or individuals will be unable to ...
Related Articles
  1. Junk Bonds: Everything You Need To Know
    Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. What is the difference between convertible ...
    Options & Futures

    What is the difference between convertible ...

  4. Why do companies issue debt and bonds? ...
    Investing

    Why do companies issue debt and bonds? ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center