Which of the following statements about debentures is FALSE?

(A) Debenture is a part of owned capital.

(B) Debentures cannot be converted into shares.

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

(D) Debentures cannot be issued at a premium.

Choose the correct answer from the options given below:

Analyzing each statement about debentures:

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

FALSE. Debentures represent borrowed capital (loan capital), not owned capital. Debenture holders are creditors of the company. Owned capital consists of share capital and reserves & surplus.

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Statement (B): Debentures cannot be converted into shares

FALSE. Debentures can be classified as:

• Convertible Debentures → Can be converted into equity shares after a specified period
• Non-Convertible Debentures → Cannot be converted into shares

Since convertible debentures exist, this statement is incorrect.

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

TRUE. Redeemable debentures are issued with a fixed maturity date or specific period after which they must be repaid. The company is obligated to repay the principal amount to debenture holders on the due date.

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Statement (D): Debentures cannot be issued at a premium

FALSE. Debentures can be issued at:

• Par (face value = issue price)
• Premium (issue price > face value)
• Discount (issue price < face value)

When issued at premium, the excess amount over face value is credited to Securities Premium Reserve.

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The FALSE statements are (A), (B) and (D).

Correct Answer: Option 1