Govt. H.S.S Thengamam - PowerPoint PPT Presentation
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Govt. H.S.S Thengamam
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Title: Govt. H.S.S Thengamam
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WELCOME
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Govt. H.S.SThengamam
- subject
- Topic.
- Accounting for Debenture
- Debenture
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Debenture - Meaning
- Debenture is a creditor ship security. It is a
document that creates or acknowledge a debt. The
debenture holder is entitled to get a fixed rate
of interest.
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Definition
- The Companies Act Defines debenture as
debenture stock ,bonds and any other securities
of a company, whether constituting a charge or
not.
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Purpose of issuing debenture
- For setting up a new project.
- Expansion or diversification of Existing project.
- Normal capital expenditure for modernization.
- Merge/Amalgamation of companies.
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Types of debentures
- Secured debentures.
- Unsecured debenture.
- Redeemable debentures.
- Perpetual debentures.
- Convertible debenture.
- Non-convertible debenture.
- Coupon rate debenture.
- Zero coupon debenture.
- Registered debenture.
- Bearer debenture
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Secured debenture
- Those debentures which are secured on
particular assets called secured debenture.
These debenture are also called known as
Mortgage debenture.
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Unsecured debentures.
- Unsecured debentures are those which are not
secured fully or partially by a charge on asset.
General solvency of the company is the only
security for their holders. These are also called
naked debenture or simple debenture.
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Redeemable debenture
- Debentures which are repayable after a stated
period of time are called redeemable debenture.
Debentures issued by companies are generally of
this type.
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Irredeemable debentures
- Debentures which are not repayable during the
life time of the company are called irredeemable
debenture. the company may repay the money at
the time of liquidation or on the happening of a
contingency or after the expiry of a very long
period.
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Convertible debentures
- Debentures which are convertible in to shares
or securities at the option of the holders, after
a certain period , are called convertible
debentures. - Convertible debentures are two types
- 1.Fully convertible debentures.
- 2.Partly convertible debentures.
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Non-convertible debentures
- Debentures which are not convertible into
Shares or other securities of the company are
called non-convertible debentures
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Specific rate
- Debentures are usually issued with a specified
rate of interest .This specified rate is called
Coupon rate .It may be either fixed or floating
.The floating interest is usually linked with the
bank rate and yields on treasury bond plus a
reward for risk
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Zero coupon bond
- A zero coupon bond is one which does not carry
a specified rate of interest. In order to
compensate the investors such bonds are issued at
a substantial discount .The difference between
the face value and issue price is the total
amount of interest related to the duration of the
bond.
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Registered debentures
- These are debentures which are payable to the
registered holders. The names of the holders of
these debentures appear both on the debenture
certificate and in the companys register of
debenture holders.
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Bearer debentures
- Debentures which are payable to the bearer are
called bearer debentures .The names of the
debenture holders are not recorded in the
register of debenture holders. They are treated
as negotiable instruments and as such they are
transferable by mere delivery.
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Trust deed
- A document created by the company regarding the
appointment of trusters in order to protect
the interests of debenture holders before they
are offered for public subscription - The following are those eligible to be a
debenture trustee - a) A scheduled bank
- b) A public financial institution according to
sec 4 A (1) of companies act 1956 - c) An insurance company
- d) A body corporate
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Difference between Share Debenture
- Share
- Proprietor of the company
- Return in the form of dividend.
- Appropriation of profit
- Always unsecured.
- Right to attend meeting and vote
- Last claim amount of capital.
- No charge on the asset of the company.
- Except redeemable preference shareholders others
will get their money back only at the time of
liquidation.
- Debenture
- Creditor of the company.
- Return in the form of interest.
- Charge against profit
- Mostly secured.
- No right to attend meetings vote.
- First claim amount of capital.
- Charge is created on the asset of the company.
- Debenture holder can get back their money at the
time of redemption.
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Thank you,
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