What do you understand by debenture? State any two features of Debenture.

Debenture is a certificate issued by a company acknowledging a debt by it to the investor As per the term of issue. It is an evidence of debt due from the company with or without Charge on the assets of the company. The holders of debentures are known as debenture Holders and the capital raised by the company by issuing debenture is called loan capital. A debenture includes the information like amount of loan, rate of interest, duration of loan,Collateral for loan, condition of repayment etc.

Two main features of debentures are explained below:

a. Long-term source of capital: The maturity period of the debenture issued by the Company is generally longer i.e. at least five years. Thus, it provides funds to the Company for longer duration and regarded as long-term source of capital. Such funds Can be utilized in a company to acquire fixed assets, to expand and modernize the Company etc.

b. Form of loan capital: An amount collected by a company through the issues of Debentures form a part of loan capital. As the debenture holders are the creditors of The company, they do not intervene in the ownership and control of the company.

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