# Issue of Secured Debentures [Section 71(3) read with Rule 18(1)]

Secured debentures may be issued subject to the terms and conditions prescribed in Rule 18(1) of the Companies (Share Capital and Debentures) Rules, 2014.

## a. Maximum Tenure of Secured Debentures

### General Rule

Tenure of secured debentures shall NOT be more than 10 years from the date of issue.

### Exception — Tenure up to 30 Years

For the following categories, tenure may extend up to 30 years:

#	Eligible Category
i	Companies engaged in setting up of infrastructure projects
ii	Infrastructure Finance Companies as defined in clause (viia) of sub-direction (1) of direction 2 of NBFC (Non-deposit accepting/holding) Companies Prudential Norms (RBI) Directions, 2007
iii	Infrastructure Debt Fund NBFCs as defined in clause (b) of direction 3 of Infrastructure Debt Fund NBFC (RBI) Directions, 2011
iv	Companies permitted by a Ministry/Department of Central Government, RBI, National Housing Bank or any other statutory authority to issue debentures exceeding 10 years

## b. Appointment of Debenture Trustee

Debenture trustee shall be appointed by the company BEFORE the issue of prospectus or letter of offer for subscription of its debentures.

## c. Security by Creation of Charge

Security for debentures can be provided by creating a charge or mortgage in favour of the debenture trustee, on:

Type	Description
(i) Movable Property	Specified movables of the company OR its subsidiaries OR its holding company OR its associate companies
(ii) Immovable Property	Specified immovable properties wherever situated, or any interest therein

### Important Notes on Charge

1. Sufficiency of Value: Value of assets/properties on which charge is created shall be sufficient for due repayment of debentures and interest thereon.

2. NBFC Exception: In case of NBFCs, the charge or mortgage may be created on any movable property (no restriction to 'specified' movables).

3. Government Company Exemption: Where debentures issued by a Government company are fully secured by guarantee of the Central Government / State Government(s) / both, the requirement for creation of charge under Rule 18(1) shall NOT apply.

## d. Debenture Trust Deed

Shall be executed in Form SH-12
Purpose: To protect the interest of debenture holders
Timeline: Within 3 months of closure of the issue or offer

## Quick Recall Map

```

SECURED DEBENTURE = 4 Pillars

1. Tenure → Max 10 yrs (30 yrs for infra)

2. Trustee → Appointed BEFORE prospectus

3. Charge → On movable/immovable property in trustee's favour

4. Deed → Form SH-12 within 3 months of issue closure

```

Worked example

### Example 1

Example 1: ABC Infrastructure Ltd., a company engaged in setting up of road infrastructure, wants to issue secured debentures with a maturity period of 25 years. Is this permissible?

Answer: Yes. The general rule restricts tenure to 10 years, but companies engaged in setting up of infrastructure projects are entitled to issue secured debentures for a period up to 30 years. Hence, 25-year tenure is valid for ABC Infrastructure Ltd.

### Example 2

Example 2: PQR Ltd. issued secured debentures on 1st January 2025. The issue closed on 31st March 2025. By when must the debenture trust deed be executed in Form SH-12?

Answer: The debenture trust deed in Form SH-12 must be executed within 3 months of closure of the issue. Since the issue closed on 31st March 2025, the trust deed must be executed by 30th June 2025.

⚠️ Common exam mistakes

Applying the 30-year maximum tenure to all companies — it is restricted to specified infrastructure-related categories only.
Confusing the timeline — debenture trustee is appointed BEFORE prospectus, but trust deed is executed WITHIN 3 MONTHS of issue closure.
Forgetting that charge can be created on assets of subsidiary, holding, or associate company — not just the company itself.
Missing the NBFC relaxation that charge can be on ANY movable property (not just specified movables).

Bare-Act text Section 71(3) read with Rule 18(1) · Companies Act, 2013 and Companies (Share Capital and Debentures) Rules, 2014 · click to expand

Section 71(3): Secured debentures may be issued by a company subject to such terms and conditions as may be prescribed. Rule 18(1) of Companies (Share Capital and Debentures) Rules, 2014: The company shall not issue secured debentures, unless it complies with the following conditions, namely:— (a) An issue of secured debentures may be made, provided the date of its redemption shall not exceed ten years from the date of issue: Provided that a company engaged in setting up of infrastructure projects may issue secured debentures for a period exceeding ten years but not exceeding thirty years; (b) such an issue of debentures shall be secured by the creation of a charge on the properties or assets of the company or its subsidiaries or its holding company or its associates companies, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon; (c) the company shall appoint a debenture trustee before the issue of prospectus or letter of offer for subscription of its debentures and not later than sixty days after the allotment of the debentures, execute a debenture trust deed to protect the interest of the debenture holders; (d) the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on—(i) any specific movable property of the company or its holding company or subsidiaries or associate companies or otherwise; (ii) any specific immovable property wherever situate, or any interest therein.

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Issue of Secured Debentures - Tenure, Trustee and Charge

Worked example

⚠️ Common exam mistakes