Which statements are wrong about debentures?

(A) Debenture is a part of owned capital.

(B) The debentures cannot be issued at a discount of more than 10% of the face value.

(C) Debentures cannot be converted into shares.

(D) Redeemable debentures are those debentures, which are payable on the expiry of the specific period.

Choose the correct answer from the options given below:

Analysis of Each Statement

Statement (A): Debenture is a part of owned capital

This is WRONG. Debentures represent borrowed capital (debt/loan), not owned capital. Owned capital consists of equity share capital and preference share capital. Debenture holders are creditors of the company, not owners.

Statement (B): The debentures cannot be issued at a discount of more than 10% of the face value

This is WRONG. There is no such restriction under the Companies Act. Debentures can be issued at any rate of discount as decided by the company. The 10% restriction does not apply to debentures. Companies have flexibility in deciding the discount rate for debenture issues.

Statement (C): Debentures cannot be converted into shares

This is WRONG. Debentures can be convertible or non-convertible. Convertible Debentures are those which can be converted into equity shares after a specified period as per the terms of issue. Non-Convertible Debentures cannot be converted into shares. Since convertible debentures exist, the statement claiming debentures cannot be converted is incorrect.

Statement (D): Redeemable debentures are those debentures, which are payable on the expiry of the specific period

This is CORRECT. Redeemable debentures are issued with a specific maturity date and are repaid to debenture holders after the expiry of that predetermined period.

Conclusion

Wrong statements are: (A), (B) and (C) only

Correct Answer: Option 2