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A debenture is one of the most typical forms of long term loans that a company can take.
It is normally a loan that should be repaid on a specific date, but some debentures are
irredeemable securities (sometimes referred to as perpetual debentures).
The majority of debentures come with a fixed interest rate. This interest must be paid before
dividends are paid to shareholders. In the US, most debentures are unsecured, but elsewhere
debentures are typically secured through the borrower’s assets.
Presenatation of debentures ?
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.
The term "debenture" is more descriptive than definitive. An exact and all-encompassing
definition for a debenture has proved elusive. The English commercial judge, Lord Lindley,
notably remarked in one case: "Now, what the correct meaning of ‘debenture’ is I do not know. I
do not find anywhere any precise definition of it. We know that there are various kinds of
instruments commonly called debentures."[2]