What is Debenture? | Meaning and Definition
What is Debenture?
Meaning of Debenture
Debentures are one of the principal sources of raising borrowed capital to meet long and medium-term financial needs. Over the years debentures have occupied a significant position in the financial structure of the companies.
The term debenture has come from the Latin word ‘debere’ which means to ‘owe’.
The term debenture has not been defined clearly under Companies Act. Sec 2(30) of the Companies Act 2013, only states that, ‘the word debenture includes debenture stock, bonds and any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not’.
Under the existing definition, debenture includes debenture stock. Debenture means a document that either creates or acknowledges debt. Ordinarily, debenture constitutes a charge on some property of company, but there may be a debenture without any such charge.
- Public Deposit
- Global Depository Receipt (GDR)
- Features of Shares
- Meaning of Equity Shares
- Types of Debentures
What is Debenture?
Palmer defines: “A debenture as an instrument under seal evidencing debt, the essence of it being admission of indebtedness.”
Topham defines: “A debenture is a document given by a company as evidence of debt to the holder, usually arising out of loan, and most commonly secured by charge.”
According to the above definitions, debenture is an evidence of indebtedness. It is an instrument issued in the form of debenture certificate, under the common seal of the company.
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