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Types of Debentures; Registered debentures; Bearer

debentures; Secured debentures; Unsecured debentures;
Convertible debentures; Non convertible debentures;
Redeemable debentures; Irredeemable debentures

The different types of debentures have been explained in brief as follows:-

● Registered Debentures:These are those debentures which are
registered in the register of the company. the names, addresses and
particulars of holdings of debenture holders are entered in a register
kept by the company. Such debentures are treated as non-
negotiable instruments and interest on such debentures are payable
only to registered holders of debentures. Registered debentures are
also called as Debentures payable to Registered holders
● Bearer Debentures: These are those debentures which are not
registered in the register of the company. Bearer debentures are
like a bearer check. They are payable to the bearer and are deemed
to be negotiable instruments. They are transferable by mere
delivery. No formality of executing a transfer deed is necessary.
When bearer documents are transferred, stamp duty need not be
paid. A person transferring a bearer debenture need not give any
notice to the company to this effect. The transferee who acquires
such a debenture in due course bonafide and for available
consideration gets good title not withstanding any defect in the title
of the transfer-or. Interest coupons are attached to each debenture
and are payable to bearer.

● Secured Debentures: These are those debentures which are
secured against the assets of the company which means if the
company is closing down its business, the assets will be sold and the
debenture holders will be paid their money. The charge or the
mortgage may be fixed or floating and they may be fixed mortgage
debentures or floating mortgage depending upon the nature of
charge under the category of secured debentures. In case of fixed
charge, the charge is created on a particular asset such as plant,
machinery etc. These assets can be utilized for payment in case of
default. In case of floating charge, the charge is created on the
general assets of the company.

If the company fails to pay the principal amount and the interest thereon. nature and value of security. dates of payment of interest.● ● The assets which are available with the company at present as well as the assets in future are charged for the purpose. If the holders exercises the right of conversion. It also requires sanction of the Central Government. These debentures do not create any charge on the assets of the company. The rate of exchange of debentures into shares is also decided at the time of issue of debentures. ● . the assets will not be sold to pay off the debenture holders. right of debenture holders in case of default in payment by the company. they cease to be the lender to the company and become the members. The only security available to such debenture holders is the general solvency of the company. That is they are considered with the ordinary creditors of the company. A mortgage deed is executed by the company. rate of interest. ● ● Convertible Debentures: These are those debentures which can be converted into equity shares. Prior approval of the shareholders is necessary for the issue of convertible debentures. ● ● Unsecured Debentures: These are those debentures which are not secured against the assets of the company which means when the company is closing down its business. The deed includes the term of repayment. There is no security for repayment of principal amount and payment of interest. The deed may give a right to the debenture holder to nominate a director as one of the Board of Directors. they have the right to recover the same from the assets mortgaged. Therefore the position of these debenture holders at the times of winding up of the company will be like that of unsecured debentures. Thus convertible debentures may be referred as debentures which are convertible into shares at the option of the holders after a specified period. These debentures have an option to convert them into equity or preference shares at the stated rate of exchange after a certain period. Interest is paid on such debentures till its conversion.

Long maturity debentures are rarely issued. 1956. unless otherwise agreed. Generally the company creates a special reserve account known as "Debenture Redemption Reserve Fund" for the redemption of such debentures. On the expiry of period. The principal amount is repayable only at the time of winding up of the company. ● Non-Convertible Debentures: These are those debentures which cannot be converted either into equity shares or preference shares. . ● ● Redeemable Debentures: These debentures are issued by the company for a specific period only. which offers to pay interest in lieu of the money borrowed for a certain period. ● ● Irredeemable Debentures: These debentures are issued for an indefinite period which are also known as perpetual debentures. The interest is regularly paid on these debentures. corporates/PSUs have started issuing debentures in Demat form. However. Bank Deposits they can be transferred from one party to another by using transfer from. however. The company makes the payment of interest regularly. Non-convertible debentures are normally redeemed on maturity period which may be 10 or 20 years. redeemed debentures can be re- issued. Unlike other fixed income instruments such as Fixed Deposits. What is a Debenture? A Debenture is a debt security issued by a company (called the Issuer). on maturity. debenture capital is redeemed or paid back. the company may decide to repay the principal amount during its lifetime. These are long-term debt instruments issued by private sector companies. The debenture capital is repaid either at the option of the company by giving prior notice to that effect or at the winding up of the company. Under section 121 of the Indian Companies Act. They may be secured or unsecured. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. Debentures are normally issued in physical form. as investors are not comfortable with such maturities Debentures enable investors to reap the dual benefits of adequate security and good returns. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally.

Generally. his assets can be sold to repay the liability to the investors · Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount. on maturity. The issuer decides the ratio for conversion. the investor has to be along with other unsecured creditors of the company What is a Debenture? A Debenture is a debt security issued by a company (called the Issuer). which offers to pay interest in lieu of the money borrowed for a certain period. as investors are not comfortable with such maturities . debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. So if the issuer fails on payment of either the principal or interest amount. What are the different types of debentures? Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: · Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares · Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. · Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. The ratio of conversion is decided by the issuer. · Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. unless otherwise agreed. Long maturity debentures are rarely issued. debentures are classified into: · Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally. This is normally decided at the time of subscription. On basis of Security. These are long-term debt instruments issued by private sector companies. Debentures can be secured or unsecured. Upon conversion the investors enjoy the same status as ordinary shareholders of the company.

However. which offers to pay interest in lieu of the money borrowed for a certain period. Unlike other fixed income instruments such as Fixed Deposits. The issuer decides the ratio for conversion.Debentures enable investors to reap the dual benefits of adequate security and good returns. Debentures are normally issued in physical form. The ratio of conversion is decided by the issuer. debentures are classified into: · Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. Bank Deposits they can be transferred from one party to another by using transfer from. In essence it represents a loan taken by the issuer who pays an . his assets can be sold to repay the liability to the investors · Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount. Debentures can be secured or unsecured. debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. This is normally decided at the time of subscription. the investor has to be along with other unsecured creditors of the company What is a Debenture? A Debenture is a debt security issued by a company (called the Issuer). corporates/PSUs have started issuing debentures in Demat form. What are the different types of debentures? Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: · Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares · Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. So if the issuer fails on payment of either the principal or interest amount. · Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. · Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. Upon conversion the investors enjoy the same status as ordinary shareholders of the company. On basis of Security. Generally.

So if the issuer fails on payment of either the principal or interest amount. his assets can be sold to repay the liability to the investors . corporates/PSUs have started issuing debentures in Demat form. The issuer decides the ratio for conversion.agreed rate of interest during the lifetime of the instrument and repays the principal normally. Generally. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. What are the different types of debentures? Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: · Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares · Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. debentures are classified into: · Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. However. These are long-term debt instruments issued by private sector companies. Long maturity debentures are rarely issued. On basis of Security. · Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. This is normally decided at the time of subscription. debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. Bank Deposits they can be transferred from one party to another by using transfer from. Upon conversion the investors enjoy the same status as ordinary shareholders of the company. Debentures are normally issued in physical form. on maturity. as investors are not comfortable with such maturities Debentures enable investors to reap the dual benefits of adequate security and good returns. unless otherwise agreed. · Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. Debentures can be secured or unsecured. The ratio of conversion is decided by the issuer. Unlike other fixed income instruments such as Fixed Deposits.

· Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount.com/Q/What_are_the_types_of_debentures#ixzz1L2asE Q14 .answers. the investor has to be along with other unsecured creditors of the company Read more: http://wiki.