Q.1. What do you mean by the term Debenture? What are the kinds of Debentures? Answer: When a company desires to borrow a considerable sum of money for its expansion, it invites the general public to subscribe to its debentures. A debenture is a certificate issued by the company acknowledging the debt due by it to its holders and is issued by means of a prospectus in the same manner as shares. Kinds of Debentures:
The following are the various types of debentures issued by a company: 1.Security Point of View
i.Secured Debentures (Mortgaged): Mortgaged debentures are those debentures which are secured on a particular asset of the company. ii.Unsecured Debentures: When debentures are issued without any charge or security, they are termed as unsecured or naked debentures. Holders of unsecured debentures are ordinary unsecured creditors and do not enjoy any special rights. 2.Redemption Point of View
i.Redeemable Debentures: Such debentures are redeemable at par or premium after the expiry of a particular period or under a system of periodical drawings. ii.Irredeemable Debentures: Debentures may be made irredeemable or in other words perpetual. Such debentures are redeemable either on the happening of a contingency or when the company is wound up or when the company decides to redeem. 3.Convertibility Point of View
i.Convertible Debentures: Debentures may be convertible into equity or preference shares of the company on certain dates or during certain periods on the basis of an agreement between company and debenture holders. ii.Non-Convertible Debentures: Such debentures are not convertible into equity or preference shares. 4.Transferability Point of view
i.Registered Debentures: Registered Debentures are those which are payable only to the registered debenture holders. Such debentures are transferable only by trust deed. ii.Bearer Debentures: Bearer debentures are those which are payable to their...