Debenture Trust Deed Format

Debenture Trust

Debenture Trust Deed Format

This Debenture Trust Deed is made this 29th day of May 1999 between X Co. Ltd. a company registered under the Companies Act 1956 having its registered office at ……………… (hereinafter called the company which term shall include its successors) of the One Part and Mr. AB son of ………… …………  residing at ………………… and Mr. CD son of ……………… residing at …………………… (hereinafter called the trustees which term shall include their successors and the Trustee for the time being) of the Other Part.

Whereas by clause ………… sub-clause ………… of …………… its Memorandum of Association, the company is authorised to borrow or raise or secure the payment of money by the issue of debentures charged upon any of the company’s properties.

And whereas the Directors of the company being duly empowered in that behalf by para …………… of the Articles of Association of the company have decided by a resolution passed by the Board of Directors in the meeting of the Board held on ………… to raise a sum of Rs. ………… by issue of …………… First Mortgage Bearer Debentures of Rs. ………… each, bearing interest at ……… per cent per annum framed in accordance with the forms set forth in the First Schedule hereto and to secure the same by mortgaging with the trustees the properties described in the Second Schedule hereto.

And whereas the trustees above-mentioned have consented to act as trustees for the debenture-holders.

Now this deed witnesseth and declares as follows:

1. That in these presents unless there be something in the subject or context inconsistent therewith, the expressions following shall have the meaning hereafter mentioned, that is to say:

Company means ……………………………………… Ltd.

Trustees means Mr. ………………………………………

or any other trustees hereof for the time being.

Debentures means the debenture of the company in the form set out in the First Schedule hereto for the time being outstanding and entitled to the benefit of these presents.

Debenture-holders means the persons for the time being entitled to the benefit of the debentures.

Mortgaged premises means the property belonging to the Company described in the Second Schedule hereto and comprised in the security of the debenture-holders.

Words denoting the singular include the plural and vice versa unless the contrary appears from the context.

2. The debentures entitled to the benefit of these presents shall consist of a series of …………… debentures of Rs. ………… each, aggregating to Rs. ………… in all to rank pari passu without any preference or priority by reason of the date of issue or otherwise and secured by the mortgage hereby created on the mortgaged premises.

3. The company hereby covenants with the trustees that the company will on the ………… day of ………… or such earlier day as principal moneys shall become payable under clause 7 hereof pay the debenture-holders the amounts secured by their debentures respectively, and in the meantime will pay interest to the debenture-holders on the day of ………… 19…… in each year, the first payment of interest to be made on the day of ………… 19……

4. Provided that the company shall be entitled, at the end of every year, to redeem ……… per cent debentures by giving one month’s notice to the debenture-holders by advertisement of its intention to do so, on payment of the amount due on such debentures with interest up to date. The debentures to be redeemed in this manner will be determined by lot.

5. In consideration of the debentures hereby authorised aggregating to Rs. ……… the company, as the beneficial owner, hereby mortgages unto the trustees all the fixed plant and machinery and fixture at present existing at the company’s factory and described in Para A of the Second Schedule hereto and which may be acquired by the company hereafter or fixed or erected hereafter at its factory for the benefit of the debenture-holders and the property described in Para B of the Second Schedule as security for the due payment of principal moneys amounting to Rs. ………… in aggregate with interest and all other charges, expenses and other dues, the payment of which has been secured by a charge on the mortgaged premises under these presents. The charge hereby created on the property mentioned in Part A of the Second Schedule shall be the specified charge, while that on the property included in Part B of the Second Schedule shall rank as floating charges.

The trustees may, at any time, by notice in writing to the company, convert the said floating charge into a specific charge as regards any assets included in the Second Schedule and specified in the notice in case it is, in the opinion of the trustees, in danger of being seized or sold under any sort of distress or execution levied or threatened or in any other case.

6. The company  shall hold and enjoy all the mortgaged premises and carry on therein and therewith the business or any of the business mentioned in the Memorandum of Association of the company until the security hereby constituted shall become enforceable under the terms of these presents, in which case the trustees may, in their discretion, without any such request as next hereinafter mentioned and shall upon the request in writing of the holder or holders of ………… at least of the debentures, enter upon or take possession of the mortgaged premises, or any of them and may in the like discretion and shall upon the like request sell, call in, collect and convert into money the same or any part thereof with full power to sell any of the same premises either together or in parcels, and either by public auction or private contract, and either for a lump sum or for a sum payable by instalments or for a sum on account and a mortgage or charge for the balance and with full power upon every such sale to make any special or other stipulations as to title or evidence, or commencement of title or otherwise which the trustees shall deem proper and with full power to modify or rescind or vary any contract for sale of the said premises or any part thereof and to re-sell the same without being responsible for any loss which may be occasioned thereby and with full power to compromise and effect compositions and for the purposes aforesaid or any of them to execute and do all such assurance and things as they shall think fit.

7. The principal moneys due to the debenture-holders under this Indenture shall become immediately payable and the security hereby constituted shall become enforceable within the meanings of these presents in each and any of the following events:

          (a)  If the company makes default in the payment of any interest which ought to be paid in accordance with these presents.

          (b)  If the company ceases to carry on its business.

          (c)  If an order shall be made or a special resolution shall have been passed for winding up the company.

          (d)  If the company acts in contravention of clause ………… of its Articles of Association.

Provided that on the happening of the events specified in sub-clause (a), the permission given by clause 6 to hold and enjoy the mortgaged premises shall not be determined unless and until the trustees shall have first served on the …………… company a preliminary notice requiring the company to pay the interest in arrears and the company shall have neglected for the period of 30 days to comply with such notice.

8. As soon as the principal moneys shall become payable and the security enforceable under the last preceding clause No. 7 (and unless the time for payment and the security to be enforced has been expressly extended by the debenture-holders), the trustees shall enter upon and take possession of the mortgaged premises and shall forthwith take steps to consult the debenture-holders for the purpose of determining whether the business of the company may be allowed to be carried on or whether the mortgaged premises shall be realised by sale or otherwise.

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9. Until the happening of some one of the events mentioned in clause No. 7 of this Indenture, the trustees shall not be in any manner bound to interfere with the management or affairs of the said business except to the extent they may consider necessary for the preservation of the mortgaged premises or any part thereof.

10. If the debenture-holders resolve not to allow the business of the company to be carried on as mentioned in clause No. 8 above but to realise the security, the trustees shall, after giving a notice of 30 days in writing to the company, proceed to realise the mortgaged premises by sale or otherwise and, in doing so, shall conform to directions, if any, given by debenture-holders.

11. The trustees shall apply the proceeds of such sale or other mode of realisation in the following manner, that is to say, that the trustees shall pay:

          (a)  In the first place all costs, charges and expenses incurred in or about such sale or the performance or execution of trust or otherwise in relation to these presents or otherwise in respect of the security including the remuneration of the trustees.

          (b)  Secondly, the interest for the time being due and owing on the debentures.

          (c)  Thirdly, the principal money then due and owing to debenture-holders.

          (d)  And lastly, the surplus, if any, to the company or its assigns.

Provided that if the said money shall be insufficient to pay all such interest or principal money in full, then the said moneys shall be paid rateably and without preference or priority among all debenture-holders of this series according to the amount of the face value of the debentures held by them, but all interest shall be paid before any principal moneys.

12. When all the principal moneys, secured by these presents shall have been paid and satisfied, the trustees shall forthwith, upon the request and at the cost of the company and on being paid all the costs, charges and expenses properly incurred by the trustees in relation to the security, reconvey, reassign, release and surrender the mortgaged premises or so much of the same as shall not have been sold or disposed of, unto the company or its assigns.

13. If the company shall, at any time during the continuance of the security, be desirous of selling, demising or otherwise disposing of or dealing with any part of the mortgaged premises otherwise than in respect of the floating charge the ordinary course of the company’s business, the trustees may, if satisfied that the debenture-holders’ security shall not be thereby prejudiced, assent to or concur in such sale, demise, disposal or other dealing, and may, if necessary, release the property in question from the trust under this deed on such terms as the trustees may determine.

14. The company hereby covenants with the trustees:

           (i)  That the moneys secured by this deed shall be the first mortgage and charge on the mortgaged premises and shall take precedence over all other moneys which may hereinafter be borrowed by the company against the security of the premises hereto mortgaged;

          (ii)  that the company shall maintain the mortgaged premises and any and every part thereof in a fit and efficient condition of repair and shall keep the said property duly insured against risk of fire, riot, civil and war risks with such insurers and in such manner as the trustees may determine from time to time and, to default, the trustees shall carry out repair and keep insured the mortgaged premises in the interest of the debenture-holders, and shall be entitled to the immediate payment of such expenditure in full; and

         (iii)  that the company shall pay the trustees remuneration for the services under this Indenture at the rate of Rs. …………… per year, such remuneration to be a charge on the mortgaged property.

15. The debenture-holders may, by a resolution, remove the trustees or the trustees may, with the consent of the directors of the company and of the majority of the debenture-holders in writing resign or retire from trusteeship. 

16. In the event of death, bankruptcy, disability or resignation of any trustee or trustees, another trustee or trustees shall be appointed who shall thereafter have and exercise all powers of the trustee or trustees under these presents. The power of appointing a new trustee or trustees shall be vested in the directors, but no such trustee shall be appointed by the company until his appointment has been approved by a resolution of the debenture-holders.

17. The trustees may by agreement with the directors of the company modify the terms of the deed in any manner that may be necessary to meet any requirement or contingency, provided that the trustees are satisfied that such modifications are in the interests of the debenture-holders.

18. If any debenture is proved to the satisfaction of the company to have been lost, the company will issue a fresh debenture on payment of a fee of Rs. …………… for each such debenture and on such indemnity as the directors may think fit.

In witness whereof the company has caused its Common Seal to be affixed to these presents and the trustees have hereto set their hands the day and year above-written.

Witnesses:

Common Seal of the ………………

affixed in the presence of:                                                        

                                                                                                Directors

                                                                                                trustees

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