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What is meant by letter of credit? Differentiate between shareholder and debenture holder.

The word debenture is derived from the Latin word ‘debere’, which means ‘to owe’. When a company wants to take a loan on a permanent basis, it issues debentures. Debenture refers to a certificate issued by a company as a proof that the company has obtained a loan. In which all the terms related to the loan are written, such as its amount, rate of interest which is often paid half-yearly, number of installments to be given, its duration, amount of each installment, method of redemption or redemption of loan, security for loan e.t.c. Those persons who receive debentures in return for giving loans to the company are called debenture holders.

 

As per Section 2 (30) of the Companies Act 2013, “Debentures, stock bonds and any other security of the company which is evidence of debt whether of the company is included. generates any charge on the properties or not.

 

“Debenture” includes debenture stock, bonds, and any other securities of a company, evidencing a debt whether consituting a charge on the assets of the company or not.”

 

According to Palmer, “The word debenture means a form incorporated under the common currency of (a company) the essence of which is the acceptance of indebtedness.” of indebtedness.

 

According to Topham, “A debenture is a debenture given by a company to the holder in evidence of debt, which is given in lieu of the loan and which is usually secured by a charge.” “Debenture is a document given by a company evidence of a debt of the L holder usually arising out of a loan and most commonly secured a charge.” Under Sarvamudra, there is a certificate of loan given to the lender. It mentions the conditions under which the loan is taken. These conditions are related to interest payable, return of capital and security.

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