Can the company purchase its own debentures?

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Solution

Yes, a company, if authorised by its Articles of Association, can purchase its own debentures in the open market. The main purposes, of such purchase may be as follows:

(i) A company may purchase its own debenture for immediate cancellation for reducing the debenture liability especially in case when the interest rate on its debenture is higher than the market rate of interest.

(ii) A company may also purchase its own debentures with the motive investment and sell them at higher price in future and thereby earn profit.

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