Kinds of Debentures

Kinds of Debentures are as follows -

1. Bearer or unregistered debentures:

          These are debentures which are payable to bearer. These are regarded as negotiable instruments and are transferable by delivery and a bona fide transferee for value is not affected by the defect in the title of the prior holder.


1. Registered debentures:
       
            These are debentures which are payable to the registered holders a registered holder is one whose name appears both on the debenture certificate and the company’s register of debentures required to be maintained under section. 521. He can transfer them like share (section 108), but a transfer to be complete has to be registered with the company registered debentures are not negotiable instruments [ in re Rhodesia Goldfields Ltd., (1909)79 L.J.Ch.133].

2. Secured debentures:  

             Debentures which create some charge on the property of the company are known as secured debentures. The charge may be a fixed or a floating charge.

3. Unsecured or naked debentures:

             Debentures which do not have any charge on the assets of the company are known as unsecured or naked debentures the holders of these debentures like unsecured creditors may sue the company on debentures for the recovery of the debt

4. Redeemable debentures:

          Debentures are usually issued on the condition that they shall be redeemed after a certain period .such debentures are known as redeemable debentures. They may be re-issued after redemption in accordance with the provision of section .121.

5.Perpetual; debentures:

          When debentures are irredeemable they are called perpetual debentures. Debentures will be treated as irredeemable where either there is no period fixed for repayment of the principal amount or repayment of it is made conditional on the
Happing of an event which may not happen for an indefinite period or may happen only in certain specified and contingent events.e.g., the winding up of the company


6. Convertible debenture :

            These debentures give an option to the holders to convert them into preference or ordinary shares at stated rates exchange, after a certain period .if the holders exercise the right of conversion, they cease to be lenders to the company and become members instead.