Debentures is an instrument issued by the company acknowledging its debt. It is issued by the company under its seal. It is a contract for the repayment of the amount borrowed by the company from the debentureholder after certain period or at the option of company.
ACCORDING TO SECTION 2 (30) OF THE COMPANIES ACT, 2013
“Debenture includes debenture stock, bonds and any other securities of the company whether constituting a charge on the company’s assets or not.”
ACCORDING TO JUSTICE WHITY
“Debenture is a document which either creates a debt or acknowledges it.”
FEATURES OF DEBENTURES
The following are the features of debentures:
WRITTEN ACKNOWLEDGEMENT OF DEBT
Debenture is a written acknowledgement of debt issued under the common seal of the company which is repayable after specified period or at the option of the company.
CERTIFICATE OF INDEBTEDNESS
Debenture is issued by the way of granting the certificate of indebtedness on behalf of the company to the debentureholder.
Issue of debenture is a kind of contract made between the company and the debentureholder. The contract contains the details about the type of debenture issued, rate of interest as well as mode of repayment of the amount borrowed.
The return on the debenture is paid in the form of rate of interest. Interest is provided to the debentureholders, may it be quarterly, half-yearly or yearly.
TERMS OF ISSSUE
The debenture can be issued at par, premium and discount. These can be issued for cash, for consideration other than cash and as collateral security.
STATUS OF THE COMPANY
The company issuing the debenture has the status of borrower. The company is a debtor to the debentureholder ad debentureholder is the creditor to the company. That is why the debenture are also known as creditorship security.
Debenture is of various types like:
- Registered and Bearer debenture
- First and second debenture
- Redeemable and irredeemable debenture
- Secured and unsecured debenture
- Convertible and non-convertible debenture