Accountancy Part AIssue and Redemption of Debentures

Debentures that will be redeemed only at the time of winding up of th…

Read the following case study and answer question.

Rancho Ltd. was running successfully since last 8 years. Post covid there were some financial problems faced by firm, like many industries were facing. Due to their past reputation they could manage the permission from SEBI for issuing of shares on 1 Aug, 2022. They also decided to issue 12% Debentures of ₹100 each at 10% Discount and were to be redeemed at 25% premium in such a way that they could arrange fund of ₹45,00,000. At the time of issue of Debenture they also issued equity Share of ₹30,00,000 at 20% premium.

Debentures that will be redeemed only at the time of winding up of the company are known as :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Irredeemable Debentures

Debentures with no fixed date of repayment during the life of the company are irredeemable (perpetual) debentures; they are paid back only on winding up or after a very long period.

NCERT (2026-27 edition):
Irredeemable Debentures – “… Irredeemable debentures are also known as Perpetual Debentures because the company does not give any undertaking for the repayment of money borrowed by issuing such debentures. These debentures are repayable on the winding-up of a company or on the expiry of a long period.”