Meaning of debentures
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D
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Company AccountsQ-1 | Introduction to Company AccountsQuestion 4896 of 112
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- A
- B
- C
- D
Detailed Solution & Explanation
Meaning of debentures:
Debenture means "an instrument in writing issued by a company under its common seal,
acknowledging its indebtedness for a certain sum of money and undertaking to repay it on
or after a fixed future date."
According to sec. 2(12) of the Companies Act, 1956 (now section 2(30) of Companies Act,
2013) "Debenture include debenture stock, bonds and any other securities of a company,
whether constituting a charge on the assets of the company or not."
Characteristic features of a debenture:
It is issued by the company and is in the form of a certificate of indebtedness.
It usually specifies the date of redemption. It also provides for the re-payment of
principal and interest at specified date or dates.
It generally creates a charge on the undertaking or undertakings of the company.
Usually the words pari passu appear in the terms and conditions of debentures.
This means that all the debentures of a particular class will receive the money
proportionately in case the company is unable to discharge the whole obligation.
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