Chp 9

BORROWINGSDEBENTURES What you should know?  Borrowing Powers.  Meaning of Debenture and types of Debentures  Debenture Trust Deed  Redemption of Debentures and Remedies of Debenture Holders  Charges – fixed and floating charge  Registration of charge

Characteristic features of a debenture 1. It is issued by the company and is the form of a certificate of indebtedness. 2. It usually specifies the date of redemption. It also provides for the re-payment of principal and interest at specified date or dates. 3. It generally creates a charge on the undertaking or undertakings of the company. Usually the words ‘ pari passu ‘ appear in the terms and conditions of debentures. This means that all the debentures of a particular class will receive the money proportionately in case the company is unable to discharge the whole obligation.

Borrowing Powers Every trading company has an implied power to borrow. A non- trading company must, in its Memorandum or Articles, contain an express power to borrow; it cannot be implied.

Debentures Debenture means” an instrument in writing issued by a company

• under its common seal, • acknowledging its indebtedness for a certain sum of money and • undertaking to repay it on or after a fixed future date.”

Characteristics features of deb. • It is issued by the company and is the form of a certificate of indebtedness. • It usually specifies the date of redemption. It also provides for the re-payment of principal and interest at specified dates.dates. • It generally creates a charge on the or undertakings of the company. • Usually the words ‘ pari passu ‘ appear in the terms and conditions of debentures. This means that all the debentures of a particular class will receive the money proportionately in case the company is unable to discharge the whole obligation.

Types of Debentures 1 2. 3. 4. 5. 6.

Registered debentures. Bearer Debentures. Simple and Naked Debentures . Mortgage Debentures. Redeemable Debentures. Irredeemable Debentures.

Debentures (CONT) 7. Convertible Debentures. (a) Fully Convertible Debentures (b) Partly Convertible Debentures 8. Zero interest Debentures 9

Indexed Bonds/ Debentures