# Manner of Issue of Debentures [Section 71]
## 1. Issue of Debentures with Conversion Option [Section 71(1)]
A company may issue debentures with an option to convert such debentures into shares, either:
- Wholly (fully convertible), or
- Partly (partly convertible)
at the time of redemption.
### Procedural Requirement
The issue of debentures with conversion option (wholly or partly) must be approved by a SPECIAL RESOLUTION passed at a general meeting.
## 2. Classification by Security
### a. Unsecured / Naked Debentures
Where debentures are NOT secured by any mortgage or charge on any property of the company, they are called naked or unsecured debentures.
### b. Secured Debentures
Where debentures are secured by a mortgage or charge on the property of the company. The Central Government may prescribe:
- Procedure for securing the issue of debentures
- Form of debenture trust deed
- Procedure for debenture-holders to inspect the trust deed and obtain copies
- Quantum of Debenture Redemption Reserve (DRR) required
- Such other matters
## 3. No Voting Rights [Section 71(2)]
No company shall issue any debentures carrying any voting rights. This preserves the distinction between ownership (equity) and creditorship (debt).
## Snapshot Table
| Type of Debenture | Approval Required | Security |
|---|---|---|
| Wholly Convertible Debentures (CCD) | Special Resolution at General Meeting | Optional |
| Partly Convertible Debentures (PCD) | Special Resolution at General Meeting | Optional |
| Non-Convertible Debentures (NCD) | Board approval (no SR required for conversion) | Secured/Unsecured |
| Secured Debentures | Subject to Rule 18(1) conditions | Secured by charge |
| Naked/Unsecured Debentures | Board approval | No security |
## Why a Special Resolution?
Conversion of debentures into equity affects the shareholding pattern and dilutes existing shareholders' control. Hence, a higher threshold (special resolution = 75% majority) is required to safeguard their interest.