Advise as per the provisions of the Companies Act, 2013, whether the following can be appointed as ‘Debenture Trustee'? (i) A shareholder of the…

As per section 71 (5) of the Companies Act, 2013, no company shall issue a prospectus or make an offer or invitation to the public or to its members exceeding five hundred for the subscription of its debentures, unless the company has, before such issue or offer, appointed one or more debenture trustees and the conditions governing the appointment of such trustees shall be such as may be prescribed. Rule 18 (2) of the Companies (Share Capital and Debentures) Rules, 2014, framed under the Companies Act for the issue of secured debentures provide that before the appointment of debenture trustee or trustees, a written consent shall be obtained from such debenture trustee or trustees proposed to be appointed and a statement to that effect shall appear in the letter of offer issued for inviting the subscription of the debentures. Further according to the provided rules inter-alia, no person shall be appointed as a debenture trustee, if he- (1) beneficially holds shares in the company; (2) is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee. Thus, based on the above provisions answers to the given questions are as follows: (i) A shareholder who has holds shares of 10,000, cannot be appointed as a debenture trustee. (ii) A creditor whom company owes 999cannot be appointed as a debenture trustee. The amount owed is immaterial.