QS Study

The debenture is a financial instrument which is selling by a company for raising funds from the capital market. It is the vital source for company’s capital. It is one kind of long-term financing of a company. In that sense, debentures are the long-term financial source.

So, Debenture is a long-term security yielding a fixed rate of interest, issued by a company and secured against assets.

Common Company Act 1994: “Debentures include debenture, stocks, bonds, and any other securities of a company, whether constituting a change in the assets if a company or not”.

Gorge J. Chitty: Debenture means documents which either creates a debt or acknowledges it, and any document which fulfills either of these conditions is a debenture”.

Tophan: “Debenture is a document given by a company as an evidence of a debt to the holder usually, arising out of a loan and most commonly secured by change”.

After all, debentures are the most common form of long-term financing in a company. It is usually a long payable at the fixed date and fixed interest rate. Some debentures are irredeemable and they are not returned ever. The debenture is documented between investors and borrowers where interest rate, the redemption date, amount, security, are mentioned.