Debenture
According to the Companies Act 1956 " Debenture includes debenture stock, bonds and any other securities of company, brother constituting a charge on the assets of the company or not". Debentures are generally issued by the private sector companies as a long term promissory note for raising loan capital. The company from sister to pay interest and principal as stipulated. Bond is an alternative form of debenture in India. Public sector companies and Financial institutions issue bonds.
Characteristic features of debentures
The main characteristics feature of debentures are listed below:
1. Form: it is given in the form of certificate of indebtedness by the company specifying the debt of redemption and interest rate.
2. Interest: the rate of interest is fixed at the time of issue pixel which is known as contractual or coupon rate of interest. Interest is paid as a percentage of the par value of the debenture and may be paid anually, semi-annually or quarterly. The company has the legal binding to pay the interest rate.
Types of debentures
Debentures are classified on the basis of the security and convertibility:
1. Secured or unsecured
2. Fully convertible debenture
3. Partly convertible debenture
4. Non convertible debenture
