Question

Young India Ltd. had issued following debentures:
(a) 1,00,000, 10% fully convertible debentures of ₹ 100 each on 1st April, 2016 redeemable by conversion after 5 years.
(b) 20,000, 10% Debentures of ₹ 100 each redeemable after 4 years , 25% Debentures in Cash and 75% by conversion.
State the amount of DRR required to be created as per the Companies Act,2013.

Answer 1

(a) There is no need for creation of DRR because these debentures are fully convertible.

(b) DRR would be created for non-convertible part of debentures.

$\begin{array}{c}\text{Amount Required to be transferred to DRR}=\text{25\% of Face value of Debentures(Non-convertible)}\\ =\text{25\% of Rs 5,00,000(20,00,000}\times \text{25\%)}=\text{₹ 1,25,000}\end{array}$