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Question

What is a debenture? Explain Debenture Capital.

Accepted Answer

Debentures is an instrument in writing, acknowledging a debt under a common seal of a company.

Debenture represents the borrowed capital of a company.
The debenture is an acknowledgment of debt.
The debenture holder is a creditor of the company.
Compared to equity shares, debenture capital is considered safe and secured capital.
Debentures are repaid on the expiry of a fixed period at the winding up of the company before equity shares are repaid.
A debenture may be secured, unsecured, redeemable, convertible, non-convertible, etc
Secured debentures have a charge on the assets of the company.
Redeemable debentures are repaid on the expiry of a fixed period.
Convertible debentures are converted into equity shares on the expiry of a fixed period.
Non-convertible debentures cannot be converted into equity shares but are repaid on the expiry of the fixed period.

Answer