Debentures:

• A debenture is a certificate issued by a company to public in order to obtain public money as loan.
• The way a company invites public to buy shares it can ask public to buy debentures.
• The basic difference between a share and a debenture is that a share-holder becomes the part owner of the company whereas a debenture holder becomes creditor of the company from whom the company has taken the money as loan.
• Debentures are issued when company is in need of additional capital but does not want to issue shares. The total capital needed is divided into small parts i.e. debentures and then public is invited to subscribe for them.
• Debenture is a liability to the company. Buyers of debentures become creditors of the company. The company needs to pay them interest at pre-decided rates and period. At the end of the pre-decided time frame the company as per conditions returns the entire money to the debenture holders or convert the money equal to the share value and gives shares to the debenture holders.
• Issuing debentures is a good medium-term as well as long-term nnance option for the company.
• When a company issues debentures it appoints trustees who work for protecting the interests of debenture holders as per the Trust Deed.