Disclosure and Creation of Charge

The offer document should specifically state to which the security would be created as also the ranking of the charge(s). In the case of residual charge or subordinated obligation, the associated risks should also be dearly relevant consent for creation of security such as pari pass II letter, consent of the lesson or in case of leasehold land and so on, should be obtained and submitted to the d before opening of the debenture issue.

If the issuing company proposes to create II charge for debentures of maturity of 10 months, it should file the particulars of the charge under the Companies Act with the charge is to be created on such debentures, the issuer company should ensure the provisions of the Companies (Acceptance of Deposits) Rules, 1975, as unsecured bonds are treated as deposits for purposes of these rules. The proposal to create a otherwise, with respect to such debentures may be disclosed in the offer document a implications. The issue proceeds should be kept in an escrow account until the document creation of security as stated in the offer document are executed.

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