What is a Debenture?
A debenture is a type of debt instrument that is not secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness and reputation of the issuer.
Both corporations and governments frequently issue this type of bond to secure capital.
Types
There are two types of debentures as :
1 .convertible debentures and
2. nonconvertible debentures
Convertible debentures are bonds that can convert into equity shares of the issuing corporation after a specific period of time.
Nonconvertible debentures are regular debentures that cannot be converted into equity of the issuing corporation.
Debentures are generally freely transferable by the debenture holder.
Debenture holders have no rights to vote in the company's general meetings of shareholders,
but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures.
The interest paid to them is a charge against profit in the company's financial statements.
