Explain the different types of debentures?

— Kishore V, SME and ACW at Edumarz

• Secured Debentures: 

1. Secured debentures are debentures in which a charge is placed on the enterprise’s properties or assets for the purpose of making a payment. 
2. It’s possible that the fee is either floating or fixed. 
3. The fixed charge is formed against assets that come into the ownership of the business for the purpose of being used in non-sale operations, whereas the floating charge is established against all assets excluding those accredited to secured creditors. 
4. A fixed charge is placed on a specific asset, whereas a floating charge is placed on the company’s overall assets.

• Unsecured Debentures: 

1. They do not have a specific charge on the company’s assets. On these debentures, however, a floating charge may be imposed by default. 
2. These debentures are often not distributed.

• Redeemable Debentures: 

1. These are debentures that are payable at the end of the time period, either in one lump sum or in instalments during the life of the business. 
2. Debentures can be redeemed at a discount or at face value.

• Irredeemable Debentures (also known as Perpetual Debentures): 

1. These debentures are sometimes known as perpetual debentures since the corporation makes no attempt to return the money gained or borrowed by circulating such debentures. 
2. These debentures are repayable upon the closure of a business or the end of a protracted period of time.

• Convertible Debentures: 

1. Convertible debentures are debt instruments that can be converted into equity shares or any other security at the discretion of the company or the debenture holders. 
2. These debentures might be fully convertible or partially convertible.

• Non-Convertible Debentures: 
• Non-Convertible Debentures are debentures that cannot be converted into shares or other instruments. \
• This category includes the majority of debentures issued by businesses.
• Debentures with a Specific Coupon Rate: 

1. These debentures are issued with a specified rate of interest, which is referred to as the coupon rate.

• Zero-Coupon Rate Debentures: 

1. These debentures don’t usually have an interest rate attached to them. 
2. Such debentures are circulated at a significant discount to recover investors, and the difference between the nominal value and the circulated price is considered as the amount of interest connected with the debentures’ tenure.

• Registered Debentures: 
  

1. These are debentures in which all information about the debenture holders, such as their addresses, names, and holdings, is preserved in a register managed by the company. 
2. Only a conventional transfer document can be used to shift such debentures.

• Bearer Debentures: 

1. These are debentures that can be transferred by delivery and in which the corporation keeps no record of the debenture holders. 
2. The individual who delivers the interest coupon connected to debentures receives the interest.