DEBENTURES
The term ‘debenture’ is derived from the Latin word ‘debate’ which refers
to borrow. A debenture is a written tool accepting a debt under the general
authentication of the enterprise. It comprises of an agreement for
repayment of principal after a particular period or at intermissions or the
option of the enterprise and payment of interest at a fixed rate due to,
usually either yearly or half-yearly on fixed dates. According to section
2(30) of The Companies Act, 2013 ‘Debenture’ comprises of – Debenture
Inventory, Bonds, and any other securities of an enterprise whether
comprising a charge on the assets of the enterprise or not.
Debentures are a debt instrument used by companies and the government
to issue loans. The loan is issued to corporates based on their reputation at
a fixed rate of interest. Debentures are also known as a bond that serves as
an IOU between issuers and purchaser. Companies use debentures when
they need to borrow the money at a fixed rate of interest for its expansion.
Secured and Unsecured, Registered and Bearer, Convertible and Non-
Convertible, First and Second are four types of Debentures. Let us learn
more about Debentures in detail.
Types of Debentures
1. Secured and Unsecured:
Secured debenture creates a charge on the assets of the company, thereby
mortgaging the assets of the company. Unsecured debenture does not carry
any charge or security on the assets of the company.
2. Registered and Bearer:
A registered debenture is recorded in the register of debenture holders of
the company. A regular instrument of transfer is required for their transfer.
In contrast, the debenture which is transferable by mere delivery is called
bearer debenture.
3. Convertible and Non-Convertible:
Convertible debenture can be converted into equity shares after the expiry
of a specified period. On the other hand, a non-convertible debenture
cannot be converted into equity shares.
4. First and Second:
A debenture that is repaid before the other debenture is known as the first
debenture. The second debenture is that which is paid after the first
debenture has been paid back.
Issue of Debentures
No company can solely depend on its capital, though it is desirable. Some
investors are more cautious and hesitate to invest their funds in the risk
capital of the companies. To attract such types of investors to lend money
as a loan, bonds and debentures are issued. These securities are also known
as “Creditorship securities”. Just as uniform parts of the capital are known
as shares, uniform parts of loans raised by the companies are known as
debentures or bonds. The issue of debentures is governed almost by the
The term ‘debenture’ is derived from the Latin word ‘debate’ which refers
to borrow. A debenture is a written tool accepting a debt under the general
authentication of the enterprise. It comprises of an agreement for
repayment of principal after a particular period or at intermissions or the
option of the enterprise and payment of interest at a fixed rate due to,
usually either yearly or half-yearly on fixed dates. According to section
2(30) of The Companies Act, 2013 ‘Debenture’ comprises of – Debenture
Inventory, Bonds, and any other securities of an enterprise whether
comprising a charge on the assets of the enterprise or not.
Debentures are a debt instrument used by companies and the government
to issue loans. The loan is issued to corporates based on their reputation at
a fixed rate of interest. Debentures are also known as a bond that serves as
an IOU between issuers and purchaser. Companies use debentures when
they need to borrow the money at a fixed rate of interest for its expansion.
Secured and Unsecured, Registered and Bearer, Convertible and Non-
Convertible, First and Second are four types of Debentures. Let us learn
more about Debentures in detail.
Types of Debentures
1. Secured and Unsecured:
Secured debenture creates a charge on the assets of the company, thereby
mortgaging the assets of the company. Unsecured debenture does not carry
any charge or security on the assets of the company.
2. Registered and Bearer:
A registered debenture is recorded in the register of debenture holders of
the company. A regular instrument of transfer is required for their transfer.
In contrast, the debenture which is transferable by mere delivery is called
bearer debenture.
3. Convertible and Non-Convertible:
Convertible debenture can be converted into equity shares after the expiry
of a specified period. On the other hand, a non-convertible debenture
cannot be converted into equity shares.
4. First and Second:
A debenture that is repaid before the other debenture is known as the first
debenture. The second debenture is that which is paid after the first
debenture has been paid back.
Issue of Debentures
No company can solely depend on its capital, though it is desirable. Some
investors are more cautious and hesitate to invest their funds in the risk
capital of the companies. To attract such types of investors to lend money
as a loan, bonds and debentures are issued. These securities are also known
as “Creditorship securities”. Just as uniform parts of the capital are known
as shares, uniform parts of loans raised by the companies are known as
debentures or bonds. The issue of debentures is governed almost by the
