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Characteristics Of Debentures

Debentures are ranked as creditors of the company. Debenture is long-term debt and issued under the common seal of the company. In brief, a debenture possesses the following characteristics.

1. Debenture is an instrument of loan.

2. Interest is paid at fixed rate every year and debentures is known as"fixed cost bearing capital".

3.Debenture has common seal of the company.

4. Debenture is redeemable at a fixed and specified time.

5. Debenture-holders are the creditors of company not owners.

6. Debenture is a form of long-term borrowed capital.

7. Debenture-holders have no right to cast vote in company's general meting.

8. At the time of liquidation, first priority is given to debenture-holders at the time of repayment.

9. Debentures can be issued to fulfill the requirement of huge capital. Small firms most often find it more expensive source of financing.

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