The word debenture is derived from the word debt which means loan. Debenture is a written certificate.
It is an evidence of loan used by the company for the debts of the company. Company issue debentures to the debenture holders in which fixed amount of interest on loan is mentioned. Companies used it for the borrowing of long term debts.
At the time of liquidation of the company the debenture holders enjoy the first priority to return the amount of loan.
Kinds of debentures:
These debentures are registered with the name of the particular person on the certificate of debenture.
The detail of the person is recorded in the registers of the company.
These debentures are not transferable to the other person.
These debentures are not registered with the name of particular person. Whoever holds it he is the owner of that debenture. These debentures are very easy to transferable to the other person. Just like the bearer cheque.
These debentures are secured with fixed assets of the issuer company.
Issuer Company has to give some security like mortgage of any fixed asset to issue the debenture certificate to the debenture holder.
These debentures are not secured by the fixed assets or any mortgage by the issuer company.
It is a loan which is given to the company without taking any security by the debenture holder
By the word redeemable we understand it as returnable amount.
That means the amount of the loan will be returnable after some specific time. We can say that the time for the return of amount is mentioned on the debenture certificate just like negotiable instruments.
The amount of these debentures is not returnable throughout the life of the company. Maturity date is not mentioned on the certificate of irredeemable debentures.
At the time of liquidity of the company the amount will be return to the debenture holder.
These are the debentures which are convertible in to shares if debenture holder wants to convert his debenture in to share it is possible to convert it in to share.
It can be transferable after a stipulated period of time.
The holder of the debenture certificate have right to change his debenture in to share.