Quick Answer: Who Is A Debenture Holder?

Why is Debenture Trustee required?

A debenture trustee has various duties to perform viz.

To ensure there is no breach in terms of the issue of debentures.

To ensure that all conditions regarding the creation of debentures are met.

To take the required steps to meet debenture holder obligations in case of a breach..

What is an example of a debenture?

Debenture definitions A voucher or certificate acknowledging that a debt is owed by the signer. … 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.

What is a debenture in simple terms?

A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.

What is difference between share and debenture?

One difference between share and debentures is that debentures become borrowed capital for the company. It is like a loan that a company has taken from the debenture holders which is supposed to pay back with interest in due time. … However, unlike shareholders, debenture holders do not get voting rights.

What are the remedies of debenture holders?

What are the remedies available for a debenture holder?Sale: If the debenture-holder is the holder of a single debenture giving a charge on the assets of the company, he will have an express or implied power of sale. … Debenture-holder Action: … Appointment of receiver: … Foreclosure: … Valuation of security and proof of balance:

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 Debenture company law?

Section 2 (30) of the Companies Act, 2013 define inclusively debenture as “debenture” includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not. … Further Company cannot issue any kind of debentures carrying any voting rights.

Why do companies issue debentures?

Why do company issue debentures, when they can borrow money from Bank. … 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. Thus most companies in order to avoid this go for loan from general public i.e Debenture.

What are the disadvantages of debentures?

Disadvantages of DebenturesEach company has certain borrowing capacity. … With redeemable debenture, the company has to make provisions for repayment on the specified date, even during periods of financial strain on the company.Debenture put a permanent burden on the earnings of a company.

Is a debenture an asset?

The debenture is sometimes called a ‘floating charge debenture’ and includes all company assets. … The debenture secures the assets for the lender should the company fail and in liquidation, the charge becomes ‘fixed’ on the asset’s value at that point in time.

Do debentures pay dividends?

The holder of debentures is known as debenture holder. Shareholders get the dividend. Debenture holders get the interest. Dividend can be paid to shareholders only out of profits.

Can a company issue unsecured debentures?

Yes. Pursuant to Section 71 of the Companies Act, 2013, a Private Limited Company can issue unsecured debentures with an option to convert such debentures into shares, either in whole or in part at the time of redemption.

Can a listed company issue unlisted debentures?

16 March 2010 can a listed company issue unlisted non convertible debentures to a bank on private placement basis……….? … You will have to file the Information memorandum and the Listing Application Form duly filled for listing of debentures. In case you require any other details, please state.

What are the rights of debenture holders?

Rights as a Debenture HolderTo receive interest / redemption in due time.To receive a copy of the trust deed on request.To apply for winding up of the company if the company fails to pay its debt.To approach the Debenture Trustee with your grievance, if any.

What is the income of debenture holder?

Debentures may be preferred over shares as they provide interest at fixed rate whereas there is no fixed income for shareholders. Debentures are generally freely transferable by the debenture holder.

Who can become debenture trustee?

Who can be appointed a Debenture Trustee? To act as debenture trustee, the entity should either be a scheduled bank carrying on commercial activity, a public financial institution, an insurance company, or a body corporate. The entity should be registered with SEBI to act as a debenture trustee.