Meeting of Debenture Holders :
A company having power to borrow money may do so, subject to its memorandum and articles, in any way in which an individual can borrow. Where it wishes to operate with borrowed money forming part of its permanent capital structure, the borrowing, however, is usually effected by means of the issue of debentures or debenture stock.
The term of issue of debentures frequently and trust deeds invariably contain provisions for meetings of the debenture-holders or debenture stockholders. Such meetings are desirable not merely for the discussion of the debenture-holders’ interests, and the ascertainment of their wishes at a time of crisis or when some modification or rearrangement is proposed by the company, but also to give effect to those wishes by means of resolutions binding on the whole body of debenture-holders.
One of the most common purpose for which the machinery of debenture-holders’ meetings is employed is to effect a modification or compromise of rights between the company and the debenture-holders. From time to time occasions arises which call for some renunciation or modification by the debenture-holders of their strict rights. It may be desirable or expedient, for example, to release particular property from the specific charge (with or without the substitution of other property), or to reduce the amount of the debenture interest, or to defer its payment for a time, or to allow the creation of debentures ranking in priority to the existing debentures, or pari passu with them ,or to release the company for a limited period from all obligations to set apart profits towards a sinking fund, or to effect an exchange of debentures for equity or preference shares. To facilitate this, there is commonly inserted in trust deeds, and often in simple debenture, a clause enabling a specified majority of the debenture-holders or debenture stockholders, by resolution, to bind the whole body to a compromise with the company in respect of their rights, or in respect of the subject-matter of the security. The convenience of such a clause is obvious; in respect of the subjected-matter of the security. The convenience of such a clause is obvious; or it enables the company to deal with the debenture, holders as a class, and prevents a few perverse or adversely interested debenture holders from obstructing a necessary or desirable arrangement. The Power must be exercised bona fide for the benefit of the whole class [British America Nickel Crpn.Vs. O’Brien (1927) AC 369,PC].
Sections 101 to 104 and Sections 106 to 107 with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of debenture-holders or any class of debenture-holders of a company, in like manner as they apply to general meetings of the company.