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Kinds of Debentures

Following are the different types of debentures

(1) Secured Debentures – These are also called debentures with mortgage. These are debentures which are secured by any asset of the company, i.e. in case of non-payment, the holder can get his money from that property. These secured debentures are of two types- first, if debentures are issued against the security of fixed assets, then they are called permanent debentures and second, if debentures are issued against the security of movable property, then they are called movable debentures.

(2) Unsecured Debentures – These are also called simple or naked debentures. These are debentures on which the company does not give any security for the payment of principal and interest. In other words, such debentures do not carry any charge on the assets of the company. The holders of these debentures are like ordinary creditors at the time of winding up of the company. (3) Redeemable Debentures These are also called temporary debentures. Debentures due are those which are repaid after a certain period or at the will of the company at any time during the life of the company.

(4) Irredeemable Debentures – These are also called Perpetual Debentures. Bad debentures are those which are not paid during the life of the company, they are paid only at the dissolution of the company.

(5) Bearer Debentures Bearer debentures are those which are paid to the person who has these debentures. The names of the holders of bearer debentures are not entered in the register of the company. These debentures are transferred only by delivery. Interest is paid to any holder on production of the coupon on the debenture.

(6) Registered Debentures – These are those debentures whose names are recorded in the register of the company. The transfer of these debentures is recorded in the register of the company. Their principal and interest are paid to the person whose name is mentioned in the register.

(7) Convertible Debentures Debentures can also be convertible. These debentures are converted according to the terms of a fixed period. Debt amount in equity shares

(8) Non-convertible Debentures: If the company does not give the option to the debenture holders to exchange shares, then they are called non-convertible debentures.

(9) First Debentures – The debentures which are paid on priority over other debentures are called first debentures. Such debentures can also be re-issued after being rectified. (10) Second Debentures The debentures which are paid after the payment of the first debentures are called second debentures.

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