Debentures
A company wants to raise funds from the public but at the same time the company doesn't want to divide its own then the debentures are the best option for them to raise long term debt capital. The debentures are the long-term fixed interest-bearing security issued by the company to raise funds. It is a written acknowledgment of money borrowed by the company promising to repay it at a future debt. It is a document containing the terms and conditions like rate of interest, repayment time securities.
The features of debentures at the venture is a loan document which evidences our loan made to the company it is fixed interest-bearing security where interest fall due on a specific date payment of interest at a fixed rate is immaterial of the profit level of the company that is interesting is paid to the debenture holders even if there is a loss in a particular year it can be bought or sold through the stock exchange at a price above or below its face value the original sum is repaid at a future date or it is converted into shares or other debentures types.
Types of debentures
Base on security convertibility negotiability permanence and priority debentures are divided into various types of secured debentures. Other debentures which are secured by a charge upon some or all the assets of the company. The charge can be fixed. Charge or floating charge otherwise they are known as unsecured dimensions convertible debentures.There are 6 types of debentures.
1. Converted debentures
The debentures are converted into equity shares after a certain time.2. Non convertible debentures
This are the debentures which cannot be converted into shares and future. They can only be repaid the destroyed debentures.3. Register debentures
The debentures which are payable toward the gesture holder whose name address and other details are recorded in the register of the company they are called as register debentures.4. Bearer debentures
Bearer debenture are the debenture that can easily be transferable by mere delivery redeemable debentures these dimensions are repayable after a certain time as per the terms of issue.5. Redeemable debentures
Redeemable debentures are the debentures which are not repayable during the lifetime of the company they are only repaid at the time of liquidation of the company first mod gauge debentures these debentures are payable first out of the property charged second mod gauge debentures are the debentures which are payable after settling the claims of the first mod gauge.Collateral security
Debentures can be issued for cash for the kind that is considered other than cash and as collateral security when the debentures are issued for cash there can be three possibilities.They can be issued per premium and discount, when the issue price of debenture is equal to its face value then they are said to be issued at per share. When the price of the debenture is greater than its face value then they are said to be issued at a premium. The debenture of rupees 10 sell at rupees 12 then the excess price that is rupees 2 will be its premium.
If the debenture is issued at a price lower than its nominal value then they are said to be issued at discount. The issue price of the venture is rupees 8 but its face value is rupees 10 then they are said to be issued at a discount when rupees 2 will be the discount in this case. The debentures are also issued to venture for consideration other than cash to settle their claims.
It means additional security given for a loan usually in case of loans acquired from bank or insurance company then it may have to issue debentures to the lender organization as collateral security against the loan in this situation the bank or insurance company has absolute right over the debentures till the time the loan is repaid, when the loan is repaid the lender company has to release the debentures but if it is not paid on the date is specified the lender organization has the right to retain the debentures and release them accordingly.
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