What are convertible debentures

what are convertible debentures

Types Of Debentures

The major types of debentures are as follows:

1.Types Of Debentures On The Basis Of Record Point Of View

a. Registered Debentures

These are the debentures that are registered with the company. The amount of such debentures is payable only to those debenture holders whose name appears in the register of the company.

b. Bearer Debentures

These are the debentures which are not recorded in a register of the company. Such debentures are transferable merely by delivery. Holder of bearer debentures is entitled to get the interest.

2. Types Of Debentures On The Basis Of Security

a. Secured Or Mortgage Debentures

These are the debentures that are secured by a charge on the assets of the company. These are also called mortgage debentures. The holders of secured debentures have the right to recover their principal amount with the unpaid amount of interest on such debentures out of the assets mortgaged by the company.

b. Unsecured Debentures

Debentures which do not carry any security with regard to the principal amount or unpaid interest are unsecured debentures. These

are also called simple debentures.

3. Types Of Debentures On The Basis Of Redemption

a. Redeemable Debentures

These are the debentures which are issued for a fixed period. The principal amount of such debentures is paid off to the holders on the expiry of such period. These debentures can be redeemed by annual drawings or by purchasing from the open market.

b. Non-redeemable Debentures

These are the debentures which are not redeemed in the life time of the company. Such debentures are paid back only when the company goes to liquidation.

4. Types Of Debentures On The Basis Of Convertibility

a. Convertible Debentures

These are the debentures that can be converted into shares of the company on the expiry of pre -decided period. The terms and conditions of conversion are generally announced at the time of issue of debentures.

b. Non-convertible Debentures

The holders of such debentures can not convert their debentures into the shares of the company.

5. Types Of Debentures On The Basis Of Priority

a. First Debentures

These debentures are redeemed before other debentures.

Source: accountlearning.blogspot.com

Category: Bank

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