What Are The Kinds Of Debentures?

Ordinary of naked debentures are those which do not carry any security for the repayment of interest and the principle amount. A mortgage debenture is one which is secured by a mortgage on the real property of the company. If the company fails to repay the borrowed amount on maturity, the mortgage debenture holders have a legal right to sell the property and to recover the loan. The debenture which are repayable after a certain period of time are called redeemable debenture. The company mostly borrows money on redeemable debentures.

A debenture which is not payable during the running life of the company is called irredeemable debenture. These are payable either on the winding up of the company. A registered debenture is issued in the name of the owner of the debenture. The name of the owner thus appears on the face of the bond as well as in the books of the company.

The bearer debenture does not show the name of the owner of the bond. The holder of the bearer debenture is entitled to receive interest payment on the due date. The debenture which are issued to raise funds for the purchase of new equipments of a business are called equipment trust debenture.