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Topic : specimen presentation of debenture certificates

Introduction :

In corporate finance, a debenture is a medium- to long-term

debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term
"debenture" originally referred to a document that either creates a debt or acknowledges it, but in
some countries the term is now used interchangeably with bond, loan stock or note. A debenture is
thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a
specified amount with interest and although the money raised by the debentures becomes a part of
the company's capital structure, it does not become share capital.[1] Senior debentures get paid
before subordinate debentures, and there are varying rates of risk and payoff for these categories.
Debentures are generally freely transferable by the debenture holder. Debenture holders have no
rights to vote in the company's general meetings of shareholders, but they may have separate
meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to
them is a charge against profit in the company's financial statements.

Aims & objectives :

All and sundry cannot be appointed as Debenture Trustees. A person

holding beneficially shares in the issuer company or beneficially entitled to receive moneys from that
company and has provided any guarantee in respect of principal debts secured by the debentures or
interest thereon as specified in section 117B of the Act. SEBI (Debenture Trustee) Regulations, 1993
additionally prescribe that no person shall be entitled to act as Debenture Trustee unless he is either a
scheduled bank carrying on commercial activity or a public financial institution within the meaning of
section 4A of the Act or an insurance company or a body corporate. It is also necessary that such an
entity should have capital adequacy of net worth of one crore of rupees and have been licensed by SEBI
to act as a Debenture Trustee.
Advantages/Merits of Debenture Issue:

It enables a company to raise funds for a specific period.

No dilution of control as debenture holders dont possess voting rights

Debenture (debt) enables the company to Trade on equity. It can pay dividend to equity shareholders
at a rate higher than overall ROI.

Debenture holders entitled to a fixed rate of interest. Eg: 10% debenture

They enjoy priority over other unsecured creditors with respect to debt repayment.

Suitable for conservative investors who seek steady ROI with little or no risk.

Interest on debentures is treated as expense and is tax deductible.

Company can adjust its gearing in accordance to its financial plan.

Debenture holders are regarded as creditors of the company and they receive preference over equity
shareholders and preference share holders.

Disadvantages/Demerits of Debenture issue:

They have a fixed maturity; hence provision has to be made for repayment.

There is a limit to which funds can be raised through debentures.

It is risky if the company fails to pay interest or principal installment on time, as debenture holders
can file petition for winding up the company.

It is not suitable for a company with fluctuating earnings as it may also lead to fluctuations in
payment of dividend payable to equity shareholders.

With more risk, you get more return. Debentures being secure investments, returns are less.

Like ordinary shares, debenture holders will not be regarded as owners of the company and have no
voting rights.


2. The Flow Of Presentation Definition About Debentures Types Of Debentures Features

Valuation of Debentures Bond Yields
3. DEBENTURES A debenture is thus like a certificate of loan or a loan bond evidencing the fact
that the company is liable to pay a specified amount with interest and although the money raised
by the debentures becomes a part of the companys capital structure, it does not become share
4. A debentures is a long-term debt instrument or security. It is also known as BOND. Bond
issued by government do not have any risk of default.
5. A company in India can issue secured or unsecured debentures. In case of debentures, the
rate of debentures are fixed and known to investors.
6. Types of debentures Non Convertible Debentures (NCD): These instruments retain the debt
character and can not be converted into equity shares. Partly Convertible Debentures (PCD): A
part of these instruments are converted into Equity shares in the future at notice of the issuer. The
issuer decides the ratio for conversion. This is normally decided at the time of subscription.
FEATURES Face value Interest rate Maturity Redemption value Market value

10. Redemption : Redemption of debentures can be accomplished either through,

Sinking fund It is a cash set aside perodically for retiring debentures. Buy-back(call)
provision Buy-back provision enable the company to redeem debentures at a specific
price before the maturity date.
11. Indenture : An Indenture or Debenture trust deed is a legal agreement between the
company issuing debentures and the debenture trustee who represent the debenture

Conclusion: A share certificate is a written document that is issued to shareholders of

a corporate to certify his share in the business. This certificate is signed on the behalf of the
corporate so it bears legal importance too. Main information on this document include

company information, face value of the share, par value of share, name of shareholder,
date oftransfer of ownership etc. Share certificate is also known as stock certificate. It is
drafted as simple certificate and company logo must be placed with company information.
Authorized signatures are also placed on the certificate.
Share certificate template offers you various benefits once you downloaded this template.
These benefits further vary from person to person and organization to organization. For
instance; the word template which you download may not be suitable for other person
having in same field. Our needs and capabilities both define what we really looking after.
Here are few benefits that you can drive are listed below;


In modern financial markets, individual investors rarely take physical possession
of their share certificates. "Scripophily" is a term that signifies the collecting of
share certificates and other forms of paper based financial securities. Similar to
stamp collecting or bank note collecting, a share certificate's value is dependent
on its condition and age.
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