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,