Paper presentation on

Debenture and Charge

PRESENTED BY AMIT PANDEY

ITM UNIVERSITY RAIPUR
B B A . L L . B . 7 TH S E M E S T E R
PRESENTED BEFORE
ASSI.PROF-
MRS. DEBASHREE CHAKRABORTY
 Debenture

Section 2 (30) of the Companies Act, 2013 define inclusively debenture

as "debenture" includes debenture stock, bonds or any other
instrument of a company evidencing a debt, whether constituting a
charge on the assets of the company or not.
Debenture is most important instrument and method of raising the
loan capital by the company. A debenture is 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.
 Kinds of debenture

1. Registered and Bearer debentures

2. Redeemable and Irredeemable debenture
3. Secured and Unsecured debenture
4. Convertible debenture
5. Right debenture
 Contents of debenture

1. The company to repay the principal amount on a certain fixed date

2. A promise to pay interest at a fixed rate
3. A charge on the company assets
4. Debenture is issues subject to conditions which are endorsed on it
 Remedies available to debenture holder against non
payment

1. In case of unsecured debenture holder file a petition in the court for

the winding up of the company
2. Sue the company for payment of principal and interest .
3. In case of secured debenture holder got power like unsecured
debenture holder right and also got power to file a case and got an
order to the sale of company property.
4. In case of insolvent of company the debenture holders may ask for
the valuation of the security pledge by the company.
5. The secured debenture holder can apply to the tribunal to foreclose
the interest of the company in the assets charged.
 Charge

The Companies Act,2013 defines a Charge as an interest or lien created

on the assets or property of a Company or any of its undertaking as
security and includes a mortgage U/s 2(16). In the earlier Act of 1956,
the word Mortgage was not mentioned.
The company may borrow monies by providing security of its assets
and may create a lien on the properties of the Company. The Company
may also issue Debentures to raise funds which may carry a right/
interest in the Assets/Properties of the company. A charge is a way of
security to the creditor/lender of his interest/right on the properties of
the company for the amounts due to him by the company.
 Kinds of charge

1. Fixed Charge: A charge which is identifiable with specific and clear

asset/property at the time of creation of charge. The Company cannot
transfer such identified and defined property unless the charge holder
(creditor) is paid off his dues.
2. Floating Charge : It covers the floating and circulating nature of
properties of a company, like sundry debtors, stock in trade etc., The
nature of the property charged may change from time to time .The
floating charge crystallizes into fixed charge if the Company
crystallizes or the undertaking ceases to be a going concern.
 Obligation of the company to resister Charge

1. Whenever such charge is created, the Company shall register the

charges created with the concerned Registrar of Companies.
2. Forms: CHG-1 is the form to file with ROC ( for all charges other than
debentures)
3. Forms: CHG- 9 (for Debentures including rectification)
4. Time limit: Within 30 days of creation or modification along with fee,
duly signed by the company and charge-holder.
5. Fee : As prescribed in the Companies Act (Registration Offices and
Fees)Rules,2014.
 Difference between Charge and Mortgage

1. There is only one difference between the charge and mortgage that it
in the charge , the right to sell property is contractual and can be
defeated by a bona fide purchaser for value without notice, whereas
in case of a mortgage, the right to sell will consist of interest in
property being transferred to the mortgagee .
ANY QUERIES ?
THANKS