Explain the guidelines of SEBI for creating Debenture Redemption Reserve.
As per the guidelines, certain entities are exempted from creating a Debenture Redemption Reserve and may redeem debentures out of capital. These include All India financial institutions, banking companies, NBFCs registered with the Reserve Bank of India, Housing Finance companies, and companies listed on stock exchanges as well as unlisted companies.
However, for 'other unlisted companies', the creation of the reserve is mandatory. The adequacy of the Debenture Redemption Reserve shall be ten percent of the value of the outstanding debentures.
Companies are also required to invest or deposit a specific sum on or before April 30. This amount shall not be less than 15% of the amount of debentures maturing during the year ending on March 31 of the next year.
The investment can be made in deposits with any scheduled bank (free from charge), securities of the Central or State Government, or securities mentioned in the Indian Trusts Act, 1882. The amount invested or deposited must not be used for any purpose other than for redemption of debentures.
In case the debentures are redeemed in lump sum, the company invests 15% of the value of debentures. However, if the debentures are redeemed in instalments, the investment shall not be realised but carried forward to meet the requirement of Debenture Redemption Investment.
Explanation
The answer is derived from the text segments discussing 'Sources of Redemption of debentures' and the specific investment rules. It distinguishes between exempted entities (like listed companies and banks) and 'other unlisted companies' regarding DRR creation. It also details the mandatory investment requirements (15% before April 30), permissible investment avenues, and the difference in treatment between lump sum and instalment redemptions, strictly adhering to the provided context.