Meaning and definitions of debentures
(Meaning and Definition of Debentures) When a company needs long-term debt capital, it issues debentures. Debentures are certificates for sanction of loan taken by the company. Debenture is a type of agreement between the company and the lender, according to which the company pays the interest on a predetermined date and returns the loan amount. The debentures are issued by the common currency of the company.
As per Section 2(3) of the Companies Act 2013, “Debenture includes debentures, stocks, bonds and any deed of the company in evidence of debt, whether it may cause a charge on the assets of the company Any .”
Does it or not.” According to Judge Chitty, “Debenture is a document which sanctions a loan.”
Types of Debentures
Debentures issued by companies can be classified as follows
(A) From the point of view of transferability
There are two types of debentures from the point of view of transfer-
(1) Registered Debentures which are written in the register of debenture company And whose principal and interest are payable only to the registered holders, are called registered debentures.
(2) Bearer Debentures: The mere delivery of such debentures leads to transfer from one party to another, that is, the names of the holders of such debentures are not entered in the register of debenture holders.
(B) From the point of view of security
From the point of view of security or security, there are two types of debentures:
(1) Unsecured or ordinary or naked debentures – security in the company to the holders of such debentures
Therefore, such debentures are proof that the company is liable for the amount marked on them. At the time of winding up of the company, such debentures are paid like ordinary debtors.
(2) Secured or mortgaged debentures- The holders of such debentures have received charge or mortgage on the property of the company. If the company is unable to make full payment to its creditors, then
The holders can recover their money from the mortgaged property of the company.
(C) from the point of view of refinement or stability
Debentures are of the following two types from the point of view of solvency or stability
(1) Redeemable Debentures – The payment of such debentures is predetermined on the date Or the company may do so at any time during its lifetime by issuing a notification to the debenture holders.
(2) Irredeemable Debentures Payment of such debentures happens in the same condition.
(D) From the point of view of rights
Debentures are of the following two types from the point of view of rights
(1) First Debentures The first debenture holders of such debentures on the assets of the company has a right. The principal and interest on such debentures are paid before other debentures.
(2) Second Debentures: The principal and interest amount is paid to such debenture holders after the first debentures are paid off.
(E) In terms of variability
From the point of view of convertibility, there are two types of debentures as follows: (1) Convertible Debentures The company provides this to the holders of such debentures.
gives them the right to get their debentures converted into shares as per pre-determined conditions. – (2) Non-Convertible Debentures: Such debenture holders do not have the right to convert their debentures into shares or other types of debentures.
issue of debentures (Issue of Debentures)
Issue of debentures is done like shares. For issue of debentures, the company publishes a prospectus, through which the company invites the public to purchase its debentures. The company may receive the payment of debentures in one go or in installments i.e. on application of debentures, on allotment and the balance amount on one or more solicitations.
Like shares, debentures can be issued at par at a premium and at a discount. The accounts for the issue of debentures are the same as for the issue of shares. The only difference is that instead of share capital account in entries, debenture account is opened.
Issue of Debentures at Par When debentures are issued at face value, accounts are made in respect of them in the same way as in respect of shares.
Issue of Debentures at Premium When debentures are issued at premium, the premium account is credited because by doing so the company There is benefit. The premium amount is mostly written off at the time of allotment. Issue of Debentures at Discount
deduction of is issued, the deduction account is debited. Account of deduction also with most allotments Only if different information is not given.