Definitions [2]
Definition: Debenture
- According to section 2(30) of the Companies Act, 2013, " Debenture includes debenture stock, bonds and any other securities of a Company, whether constituting a charge on the assets of the Company or not."
- “A Debenture is a document given by a company as evidence of a debt to the holder, usually arising out of a loan and most commonly secured by a charge." -Topham
- According to Evelyn Thomas, "a debenture is a document under the company's seal which provides for the payment of a principal sum and interest thereon at regular intervals, which is usually secured by a fixed or floating change on the company's property or undertaking and which acknowledges a loan to the company".
Definitions: Commercial Banks
- “A bank collects money from those who have it to spare or who are saving it out of their incomes and it lends this money to those who require it.” — Crowther
- “Bank means accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft or otherwise.” — According to Indian Companies Act, 1949
- Banking Regulation Act of 1949: “Banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, demand draft, order or otherwise.”
- Prof. Cairncross: “A bank is a financial intermediary, a dealer in loans and debts.”
Key Points
Key Points: Debentures
- Debenture: A written promise by a company to repay a loan with interest.
- Legal View: Includes all debt instruments, as per the Companies Act, 2013.
- Key Features: Fixed interest, secured by assets, issued under seal, max 10-year term (30 for infrastructure).
- Debentureholders: They are lenders, not owners of the company.
- Bond vs Debenture: Bonds may have no fixed interest; debentures always do.
Important Questions [28]
- Distinguish between the following. Owned capital and borrowed capital.
- Distinguish between the following: Shares and Debentures
- Correct the underlined word and rewrite the following sentence. Owned capital is temporary capital.
- Select the correct answer from the options given below and rewrite the statement. The accumulated dividend is paid to ______ preference shares.
- Debenture holders are ______ of the company.
- ______ is paid on borrowed capital.
- ______ participate in the management of their company.
- Write a word or a term or a phrase which can substitute the following statement. A document of title of ownership of shares.
- Equity shareholders enjoy a fixed rate of dividend.
- Justify the following statement. Equity shareholders are real owners and controllers of the company.
- Justify the following statement. Preference shares do not carry any voting rights.
- ______ shares are issued free of cost to existing equity shareholders.
- The dividend is paid first to ______ shareholders.
- Answer the following question. Define preference shares. What are the different types of preference shares?
- Distinguish between the following. Equity shares and Preference shares.
- State the features of equity shares.
- Correct the underlined word and rewrite the following sentence. Retained earnings is an external source of finance.
- Explain the following term/concept. Ploughing back of profit
- Find the odd one. Debenture, Public deposit, Retained earnings.
- Explain the following term/concept. Borrowed Capital
- State whether the following statement is True or False. The deposit can be accepted for a maximum of 6 months.
- Company can accept deposits from public, minimum for ______ months.
- Justify the following statement: All companies cannot accept deposits from the public.
- State the features of Bonds.
- The holder of bond is ______ of the company.
- Correct the underlined word and rewrite the following sentence. Bond is a source of short term finance.
- Justify the following statement. Bond holder is creditor of the company.
- Correct the underlined words and rewrite the following sentence: Depository Receipt traded in USA is called as Global Depository Receipt.
