What is the provision in relation to Appointment of “Debenture trustee”?

Appointment of Debenture Trustee:- The appointment and duties of debenture trustee are dealt under section 117B of the companies Act, 1956. A company before issuing of prospectus or letter of offer for the debenture is required to fulfill the following two conditions:

1. To appoint one or more debenture trustee for such debentures.
2. To disclose on the face of prospectus or letter of offer that debenture trustee or trustees have given their consent to be appointed.

A person cannot be appointed as a debenture trustee, if he:

1. Holds the shares, beneficially
2. Is the creditors
3. Has entered into any guarantee in respect of principal debts secured by the debentures or interest thereon.

Thus on the basis of above provision answer to the question are as follows:

1. A shareholder who has no beneficial interest can be appointed as a debenture trustee.
2. A creditor whom company owes Rs. 499 cannot be so appointed because the amount owed is immaterial.
3. A person who has given guarantee for repayment of principal and interest thereon in respect of debentures also cannot be appointed as a debenture trustee.