Quick Answer: Can Irredeemable Debentures Issue India?

What is an irredeemable debenture?

How do irredeemable debentures work.

In simple terms, an irredeemable debenture is an agreement made between the lender and the borrower, usually with a favourable interest rate.

In the case of a company becoming insolvent, the debenture ensures that the lender is first to receive their funds..

Who can issue debentures in India?

Provided that an Infrastructure finance companies, Companies engaged in Infrastructure projects, Infrastructure Debt Fund Non-Banking Financial Companies and Companies permitted by Ministry or Department of Central Government or by RBI can issue Debenture beyond a period of 10 years but up to 30 years.

Can govt issue debentures?

Corporations and governments can issue debentures. Governments typically issue long-term bonds—those with maturities of longer than 10 years. Considered low-risk investments, these government bonds have the backing of the government issuer.

What are the two types of debenture?

Companies use debentures when they need to borrow the money at a fixed rate of interest for its expansion. Secured and Unsecured, Registered and Bearer, Convertible and Non-Convertible, First and Second are four types of Debentures.

Are debentures transferable?

Debentures are 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.

What is the difference between share and debenture?

Debentures and shares are both used by a company to raise capital funds from the market. But they are very different in their characteristics. A debenture is a debt tool – the funds raised are considered loans to the company. But shares allow you ownership in the company.

What is an example of a debenture?

The definition of a debenture is a long-term bond issued by a company, or an unsecured loan that a company issues without a pledge of assets. An interest-bearing bond issued by a power company is an example of a debenture.

Are debentures safe?

After paying interest for some years, the company regularly defaulted in meeting its obligation towards the debenture-holders. … Hence, the moral of the story is that, an investor should not be misled by the fact that when a debenture is secured against the assets of the company means it is a safe and secure investment.

What is the difference between redeemable and irredeemable debentures?

Redeemable debentures carry a specific date of redemption on the certificate. The company is legally bound to repay the principal amount to the debenture holders on that date. On the other hand, irredeemable debentures, also known as perpetual debentures, do not carry any date of redemption.

Why debentures are issued at discount?

Unlike shares, a company can issue debentures at a discount which is called “Debentures issued at Discount”. Giving debentures at a discount increases the capital of the company with respect to the less increase in the Cash for it.

What do you mean by bearer debentures?

A bearer debenture is an unregistered unsecured bond. The issuing corporation does not keep a record of the purchaser’s name, nor is the owner’s name listed on the debenture. The owner cannot get a replacement debenture if the original one is lost or stolen.

How do I buy debentures?

You need to have the usual trading and a demat account to buy a non convertible debenture (NCD). The process to buy a NCD is the same as that for a share. You log into your trading account or ask your broker to buy you an NCD on your behalf. The manner in which you buy and the brokerage is the same as that for shares.

Can a company issue irredeemable debentures?

Hence, from the above provisions, it can be interpreted that a company can not issue secured irredeemable debentures, simply because of the reason that in case of irredeemable debentures – the date of redemption is not fixed at all.

Is debenture a loan?

In the United States, a debenture is a loan that is backed by the full faith and credit of the issuer. This means that, in the US at least, a debenture is a type of Unsecured Loan, with the high creditworthiness of the borrower prompting the lender to make the loan.

Why do companies issue debentures?

Why do company issue debentures, when they can borrow money from Bank. … When bank lend money they generally place restriction on how that money can be used. ex- borrowed fund can be used only for capital expenditure or they limit companies ability to raise additional funds till this loan is repaid. etc.