Convertible debentures cannot be issued at a discount if:

The correct answer is Option (2) → They are to be immediately converted

Debentures that are to be converted into shares at once are, in effect, an issue of shares. Issuing them at a discount would let the company issue shares at a discount by a side door, which the law does not allow. This is the book’s own Test your Understanding item, and its answer is (a), the words of Option (2).