The most usual form of borrowing by a company is by a company is by the issue of debentures. According to Section.2 (12), ‘debenture’ includes debenture stocks bonds and any other securities of a company, whether constituting a charge on the assets of the company or not .section 2(12) does not explain as to what a debenture really is. In simple words, ‘debenture’ means a document either creates a debt or acknowledges it Debenture are commonly issued in a manner similar to the issues of shares through a prospectus .the amount might be payable by installments on the application, allotment, and calls. But usually, it is payable in one lump sum.

The characteristic of a ‘debenture’ are as follows:

      1.It is issued by a company and is usually in the form of a certificate which is an acknowledgment of indebtedness.

       2.It is issued under the company seal. It need not, however, be necessary under the company‘s seal.

       3.It is one of a series .but a single debenture is also not uncommon.

       4.It usually specifies a particular period or date as the date of repayment. it also provides for the payment of a special principal and interest at the specified date. But a company is not debarred from issuing perpetual or irredeemable debentures

       5.It generally creates a charge on the undertaking of the company or some parts of its property, but there may be debenture without any such charge

      6. A debenture-holder does not have any right to vote in the company meeting. (Section .177)

See also....

Kinds of Debenture


Post a Comment

See Also..