The Ministry of Corporate Affairs (MCA) has announced revised guidelines that ease the issuance of debentures by private limited companies, providing new avenues for corporate fundraising under simplified compliance frameworks. Effective from May 22, 2025, these relaxed norms are designed to promote non-equity financing options and encourage wider participation from private investors, especially for startups and mid-sized enterprises that are not yet ready for equity dilution or public market access.

Under the revised provisions, private companies can now issue secured or unsecured debentures via private placement to a maximum of 200 investors in a financial year, excluding qualified institutional buyers and employees under employee stock options (ESOP) schemes. The requirement for appointing a debenture trustee has been waived in cases where the issue size is below ₹50 crore and the maturity period is under 18 months. Additionally, companies are no longer required to maintain a debenture redemption reserve (DRR) for privately placed debentures, provided they do not involve public deposits.

Legal analysts have welcomed the changes as a pro-business measure that supports greater flexibility in structured financing while maintaining safeguards through mandatory disclosures, valuation reports, and board approvals. The MCA has clarified that companies must continue to file relevant forms (like PAS-3 and MGT-14) and ensure that all offers are made through properly executed offer letters and agreements. These reforms are expected to make debenture-based financing more attractive and accessible for private firms seeking efficient, lower-risk capital infusion.