Which of the following are the correct statements regarding debentures/debentures interest.

(A) The payment of interest on debentures is a charge on the profits of the company.

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

(C) Debentures cannot be converted into shares.

(D) Perpetual debentures are also known as irredeemable debentures.

Choose the correct answer from the options given below:

Analyzing each statement:

Statement (A): The payment of interest on debentures is a charge on the profits of the company.

Correct. Interest on debentures is treated as a financial expense and is charged against the profits of the company. It must be paid irrespective of whether the company earns profit or incurs loss. It is deducted before arriving at the net profit.

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

Correct. Redeemable debentures have a predetermined maturity date mentioned at the time of issue. The company is obligated to repay the principal amount to debenture holders on or before this specified date.

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Statement (C): Debentures cannot be converted into shares.

Incorrect. This is a blanket statement that is not true. Debentures are classified based on convertibility:

• Convertible Debentures: Can be converted into equity shares after a specified period as per terms of issue
• Non-Convertible Debentures: Cannot be converted into shares

Since convertible debentures exist, statement (C) is wrong.

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Statement (D): Perpetual debentures are also known as irredeemable debentures.

Correct. Perpetual debentures and irredeemable debentures are synonymous terms. These debentures have no fixed maturity date and are repayable only at the time of liquidation of the company.

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The correct statements are (A), (B) and (D) only.

Correct Answer: Option 2