What Are The Different Categories Of Debentures?

In the general context, debentures are basically divided into two chief categories.  The first category is inclusive of the registered debentures while the second category is characterized by the bearer debentures.  The first category comprises of registered debentures, which are framed and formulated in the name of a specific person who is registered by the company as a debenture holder.  

These debentures share a trait with shares in the sense that they are transferable in the same way as shares.  Both bearer and registered debentures are constituted in the same form as that of share warrants to the person who bears them and have the scope to negotiate, being transferable by mere delivery.  In the case of bearer debentures, there are further sub-categories of this second category, which are four in number.  They are namely naked or unsecured debentures, secured or mortgaged debentures, redeemable debentures and the last sub-category is irredeemable or perpetual debentures.

The debentures are classified on the basis of the terms and conditions of their issue by the company. The main categories of debentures are as under.

1. ORDINARY OR NAKED DEBENTURE.
                                                     Ordinary or naked debentures are those which do not carry any security in respect the repayment of interest or the principal. These have no priority and stand in the same position as any other unsecured creditors at the time of winding up the company.

2. MORTGAGE DEBENTURE.
                                     A mortgage debenture is pone which is secured by a mortgage on the real property of the company. If the company fails to repay the borrowed amount at a specified period, the debenture holder has a legal right to sell the property and recovered the loan.
       
3. REDEEMABLE DEBENTURES.
                                   The debenture which are repayable after the certain period are called redeemable debenture. The interest on the debentures is paid periodically but the principal amount is returned after a fixed period.
                                      
4. IRREDEEMABLE DEBENTURES.
                                    A debenture which is not payable during the life time of the issuing company s called irredeemable debenture. These are payable either on the winding up of the company or at the time of any default on the part of the company.

5. REGISTERED DEBENTURES.
                                    A register debenture is issued in the name of the owner of the debenture. The name of the owner thus appears on the face of the bound as well as on the books of the company.
6. BEARER DEBENTURES.
                                 Bearer debentures do not show the name of the owner on the debenture. The holders of the bearer debenture are entitled to receive interest payment on the due dates.