Discuss the various characteristics of debentures

Debentures are long-term financial instruments used by companies to borrow money, and they carry characteristics like fixed interest, repayment obligation, transferability, and no ownership rights. In business and finance, companies often require large sums of money to expand operations. 

Instead of only relying on banks, they raise funds from the public through instruments like shares and debentures. A debenture is a type of debt instrument issued by companies that promises to repay borrowed money with a fixed rate of interest.

Main Characteristics of Debentures

• Nature of Instrument: Debentures are a type of loan or debt instrument.
• Fixed Interest: Debenture holders receive a fixed interest, usually payable annually or semi-annually.
• Repayment: The company is legally bound to repay the principal amount at maturity.
• No Ownership Rights: Debenture holders are creditors, not owners. They do not get voting rights in company decisions.
• Transferability: Debentures can be freely transferred or traded in financial markets.
• Security: Some debentures are secured against assets, while others are unsecured.
• Priority of Payment: In case of liquidation, debenture holders are paid before shareholders.

Types of Debentures

1. Secured and Unsecured Debentures
2. Convertible and Non-Convertible Debentures
3. Redeemable and Irredeemable Debentures