Types of Debentures; Registered debentures; Bearer

debentures; Secured debentures; Unsecured debentures;

Convertible debentures; Non convertible debentures;
Redeemable debentures; Irredeemable debentures

The different types of debentures have been explained in brief as follows:-

●
● Registered Debentures:These are those debentures which are
registered in the register of the company. the names, addresses and
particulars of holdings of debenture holders are entered in a register
kept by the company. Such debentures are treated as non-
negotiable instruments and interest on such debentures are payable
only to registered holders of debentures. Registered debentures are
also called as Debentures payable to Registered holders
● Bearer Debentures: These are those debentures which are not
registered in the register of the company. Bearer debentures are
like a bearer check. They are payable to the bearer and are deemed
to be negotiable instruments. They are transferable by mere
delivery. No formality of executing a transfer deed is necessary.
When bearer documents are transferred, stamp duty need not be
paid. A person transferring a bearer debenture need not give any
notice to the company to this effect. The transferee who acquires
such a debenture in due course bonafide and for available
consideration gets good title not withstanding any defect in the title
of the transfer-or. Interest coupons are attached to each debenture
and are payable to bearer.
●
● Secured Debentures: These are those debentures which are
secured against the assets of the company which means if the
company is closing down its business, the assets will be sold and the
debenture holders will be paid their money. The charge or the
mortgage may be fixed or floating and they may be fixed mortgage
debentures or floating mortgage depending upon the nature of
charge under the category of secured debentures. In case of fixed
charge, the charge is created on a particular asset such as plant,
machinery etc. These assets can be utilized for payment in case of
default. In case of floating charge, the charge is created on the
general assets of the company.
●
● The assets which are available with the company at present as well
as the assets in future are charged for the purpose. A mortgage
deed is executed by the company. The deed includes the term of
repayment, rate of interest, nature and value of security, dates of
payment of interest, right of debenture holders in case of default in
payment by the company. The deed may give a right to the
debenture holder to nominate a director as one of the Board of
Directors. If the company fails to pay the principal amount and the
interest thereon, they have the right to recover the same from the
assets mortgaged.
●
● Unsecured Debentures: These are those debentures which are not
secured against the assets of the company which means when the
company is closing down its business, the assets will not be sold to
pay off the debenture holders. These debentures do not create any
charge on the assets of the company. There is no security for
repayment of principal amount and payment of interest. The only
security available to such debenture holders is the general solvency
of the company. Therefore the position of these debenture holders
at the times of winding up of the company will be like that of
unsecured debentures. That is they are considered with the ordinary
creditors of the company.
●
● Convertible Debentures: These are those debentures which can
be converted into equity shares. These debentures have an option
to convert them into equity or preference shares at the stated rate
of exchange after a certain period. If the holders exercises the right
of conversion, they cease to be the lender to the company and
become the members. Thus convertible debentures may be referred
as debentures which are convertible into shares at the option of the
holders after a specified period. The rate of exchange of debentures
into shares is also decided at the time of issue of debentures.
Interest is paid on such debentures till its conversion. Prior approval
of the shareholders is necessary for the issue of convertible
debentures. It also requires sanction of the Central Government.
●
 ● Non-Convertible Debentures: These are those debentures which
cannot be converted either into equity shares or preference shares.
They may be secured or unsecured. Non-convertible debentures are
normally redeemed on maturity period which may be 10 or 20
years.
●
● Redeemable Debentures: These debentures are issued by the
company for a specific period only. On the expiry of period,
debenture capital is redeemed or paid back. Generally the company
creates a special reserve account known as "Debenture Redemption
Reserve Fund" for the redemption of such debentures. The company
makes the payment of interest regularly. Under section 121 of the
Indian Companies Act, 1956, redeemed debentures can be re-
issued.
●
● Irredeemable Debentures: These debentures are issued for an
indefinite period which are also known as perpetual debentures. The
debenture capital is repaid either at the option of the company by
giving prior notice to that effect or at the winding up of the
company. The interest is regularly paid on these debentures. The
principal amount is repayable only at the time of winding up of the
company. however, the company may decide to repay the principal
amount during its lifetime.
What is a Debenture?
A Debenture is a debt security issued by a company (called the Issuer),
which offers to pay interest in lieu of the money borrowed for a certain
period. In essence it represents a loan taken by the issuer who pays an
agreed rate of interest during the lifetime of the instrument and repays the
principal normally, unless otherwise agreed, on maturity.
These are long-term debt instruments issued by private sector companies.
These are issued in denominations as low as Rs 1000 and have maturities
ranging between one and ten years. Long maturity debentures are rarely
issued, as investors are not comfortable with such maturities
Debentures enable investors to reap the dual benefits of adequate security
and good returns. Unlike other fixed income instruments such as Fixed
Deposits, Bank Deposits they can be transferred from one party to another
by using transfer from. Debentures are normally issued in physical form.
However, corporates/PSUs have started issuing debentures in Demat form.
Generally, debentures are less liquid as compared to PSU bonds and their
liquidity is inversely proportional to the residual maturity. Debentures can be
secured or unsecured.
What are the different types of debentures?
Debentures are divided into different categories on the basis of:
(1)convertibility of the instrument (2) Security
Debentures can be classified on the basis of convertibility into:
· Non Convertible Debentures (NCD): These instruments retain the debt
character and can not be converted in to 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.
· Fully convertible Debentures (FCD): These are fully convertible into Equity
shares at the issuer's notice. The ratio of conversion is decided by the issuer.
Upon conversion the investors enjoy the same status as ordinary
shareholders of the company.
· Optionally Convertible Debentures (OCD): The investor has the option to
either convert these debentures into shares at price decided by the
issuer/agreed upon at the time of issue.
On basis of Security, debentures are classified into:
· Secured Debentures: These instruments are secured by a charge on the
fixed assets of the issuer company. So if the issuer fails on payment of
either the principal or interest amount, his assets can be sold to repay the
liability to the investors
· Unsecured Debentures: These instrument are unsecured in the sense
that if the issuer defaults on payment of the interest or principal amount, the
investor has to be along with other unsecured creditors of the company
What is a Debenture?
A Debenture is a debt security issued by a company (called the Issuer),
which offers to pay interest in lieu of the money borrowed for a certain
period. In essence it represents a loan taken by the issuer who pays an
agreed rate of interest during the lifetime of the instrument and repays the
principal normally, unless otherwise agreed, on maturity.
These are long-term debt instruments issued by private sector companies.
These are issued in denominations as low as Rs 1000 and have maturities
ranging between one and ten years. Long maturity debentures are rarely
issued, as investors are not comfortable with such maturities
Debentures enable investors to reap the dual benefits of adequate security
and good returns. Unlike other fixed income instruments such as Fixed
Deposits, Bank Deposits they can be transferred from one party to another
by using transfer from. Debentures are normally issued in physical form.
However, corporates/PSUs have started issuing debentures in Demat form.
Generally, debentures are less liquid as compared to PSU bonds and their
liquidity is inversely proportional to the residual maturity. Debentures can be
secured or unsecured.
What are the different types of debentures?
Debentures are divided into different categories on the basis of:
(1)convertibility of the instrument (2) Security
Debentures can be classified on the basis of convertibility into:
· Non Convertible Debentures (NCD): These instruments retain the debt
character and can not be converted in to 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.
· Fully convertible Debentures (FCD): These are fully convertible into Equity
shares at the issuer's notice. The ratio of conversion is decided by the issuer.
Upon conversion the investors enjoy the same status as ordinary
shareholders of the company.
· Optionally Convertible Debentures (OCD): The investor has the option to
either convert these debentures into shares at price decided by the
issuer/agreed upon at the time of issue.
On basis of Security, debentures are classified into:
· Secured Debentures: These instruments are secured by a charge on the
fixed assets of the issuer company. So if the issuer fails on payment of
either the principal or interest amount, his assets can be sold to repay the
liability to the investors
· Unsecured Debentures: These instrument are unsecured in the sense
that if the issuer defaults on payment of the interest or principal amount, the
investor has to be along with other unsecured creditors of the company
What is a Debenture?
A Debenture is a debt security issued by a company (called the Issuer),
which offers to pay interest in lieu of the money borrowed for a certain
period. In essence it represents a loan taken by the issuer who pays an
agreed rate of interest during the lifetime of the instrument and repays the
principal normally, unless otherwise agreed, on maturity.
These are long-term debt instruments issued by private sector companies.
These are issued in denominations as low as Rs 1000 and have maturities
ranging between one and ten years. Long maturity debentures are rarely
issued, as investors are not comfortable with such maturities
Debentures enable investors to reap the dual benefits of adequate security
and good returns. Unlike other fixed income instruments such as Fixed
Deposits, Bank Deposits they can be transferred from one party to another
by using transfer from. Debentures are normally issued in physical form.
However, corporates/PSUs have started issuing debentures in Demat form.
Generally, debentures are less liquid as compared to PSU bonds and their
liquidity is inversely proportional to the residual maturity. Debentures can be
secured or unsecured.
What are the different types of debentures?
Debentures are divided into different categories on the basis of:
(1)convertibility of the instrument (2) Security
Debentures can be classified on the basis of convertibility into:
· Non Convertible Debentures (NCD): These instruments retain the debt
character and can not be converted in to 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.
· Fully convertible Debentures (FCD): These are fully convertible into Equity
shares at the issuer's notice. The ratio of conversion is decided by the issuer.
Upon conversion the investors enjoy the same status as ordinary
shareholders of the company.
· Optionally Convertible Debentures (OCD): The investor has the option to
either convert these debentures into shares at price decided by the
issuer/agreed upon at the time of issue.
On basis of Security, debentures are classified into:
· Secured Debentures: These instruments are secured by a charge on the
fixed assets of the issuer company. So if the issuer fails on payment of
either the principal or interest amount, his assets can be sold to repay the
liability to the investors
· Unsecured Debentures: These instrument are unsecured in the sense
that if the issuer defaults on payment of the interest or principal amount, the
investor has to be along with other unsecured creditors of the company

Read more:
http://wiki.answers.com/Q/What_are_the_types_of_debentures#ixzz1L2asE
Q14