The total capital of joint stock companies can be divided into owner's capital and borrowed capital. Share capital is owner's capital whereas debenture is considered as borrowed capital. The buyers of shares i.e. shareholders possess the voting right through which they own control power of the company. Debenture is a long-term loan. Companies can raise additional capital by the issue of debentures. Debenture-holders receive fixed income in the form of interest during the loan period, however, they do not possess the voting right.
Debenture is a written promise for a debt by a company under its seal which contains the terms and conditions regarding the amount of loan or principal, the rate of interest, maturity date, maturity value etc. In other words, debenture is a certification of acknowledgment issued with the seal of company in favor of lender as an evidence of debt. This written document grants the holder the right to receive interest and return of principal as per the terms under which debentures are issued.
Thus, debenture is a part of total capital of a company and debenture-holders are the creditors. Debenture-holders are entitled the right to receive interest on their fund invested in debenture. The rate of interest is predetermined and stated in the bond certificate. The interest is payable whether there is profit or loss. The amount of debenture is returned to the holders at the end of predetermined maturity period.
Debenture is a written promise for a debt by a company under its seal which contains the terms and conditions regarding the amount of loan or principal, the rate of interest, maturity date, maturity value etc. In other words, debenture is a certification of acknowledgment issued with the seal of company in favor of lender as an evidence of debt. This written document grants the holder the right to receive interest and return of principal as per the terms under which debentures are issued.
Thus, debenture is a part of total capital of a company and debenture-holders are the creditors. Debenture-holders are entitled the right to receive interest on their fund invested in debenture. The rate of interest is predetermined and stated in the bond certificate. The interest is payable whether there is profit or loss. The amount of debenture is returned to the holders at the end of predetermined maturity period.
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