A debenture used by a donor when providing capital to companies and individuals, such as a bank. This enables the payer to secure the payment against the asset – even if they default on the payment. The legal term “debenture” basically refers to a document that either creates or recognizes debt, but in some countries, the term is now used interchangeably with bond loan stocks or notes. Coupons representing the annual or semi-annual payment of interest on the debt are attached, clipped, and presented for payment on the due date. These can be deposited and collected in the banks of entrants, creditors of the corporation. Although the money raised by the entrants becomes part of the company’s capital structure, it is not shared capital. Senior debentures are paid out before subordinate debentures and there are different risk and repayment rates for these categories.
A debenture can pay a fixed charge or a floating charge. A fixed charge is usually taken against such a real asset as property. Regular debentures act as loans against the company which makes the owner of the repayment a creditor in the preferred position in the case of liquids. Freely transferable by the debenture holder. Certificates specifying the amount of stock, including coupons for added interest, are usually issued to donors. A trustee who acts on behalf of the stockholders and against whom they have actually made a claim by naming a trust that may protect the interests of the stockholders. This enables the donor to take ownership of the recipient’s assets and sell them if a payment defaults. With a fixed charge, the borrower will not be able to sell the assets without the consent of the donor. The subordinate debenture is the one that will be paid after settling other corporate debts. A convertible subordinated debenture is one that is pre-paid or subordinate to other debts of the corporation but may be converted to other securities. The shareholders of the company do not have the right to vote at the general meeting but they may have a separate meeting or vote such as changes in the rights attached to .g debentures on the interest paid on them against the profit in the financial statements of the company.
Ure’s securities are considered less secure than other ones’ securities because they lack collateral security, although this is an exception in the case of official entities such as the US Treasury Bill. English Commercial Judge Lord Lindley remarked in a remarkable case: “Now, I don’t know what ‘debenture’ really means. I have no definite definition of it anywhere. We know that there are different types of devices, commonly called debentures.”
