Q.State the main features of a debenture.

A debenture's features are what let a student tell it apart from a share at a glance, and every feature ultimately follows from the fact that a debenture is a debt, not an ownership stake.

Whether a debenture is additionally secured by a charge on the company's assets depends on its own terms of issue, not on the definition of a debenture itself.

A debenture carries a distinct bundle of features, and each one exists because a debenture represents borrowed capital rather than a share of ownership in the company.

First, a debenture is a written acknowledgment of debt — a formal document recording that the company has borrowed a stated sum from the holder and owes it back, on the terms fixed at issue. Second, a debenture carries a fixed rate of interest, often called the coupon rate, which the company must pay at regular intervals whether or not it has earned any profit in that period; this interest is a charge against the company's revenue and is deductible for tax purposes, unlike a dividend, which is only an appropriation of profit and can be skipped entirely in a loss-making year. Third, under Section 71(2) of the Companies Act, 2013, a debenture carries no voting rights whatsoever — a debenture-holder has no say in the company's general meetings or its management, because the relationship is one of lender and borrower, not of member and company.

Fourth, a debenture may or may not be secured by a charge on the company's assets, and this is purely a matter of the terms of its issue rather than a defining requirement of the instrument itself. Fifth, a debenture is generally issued for a specified period, at the end of which the company is bound to repay the principal, the tenure and manner of repayment being fixed at issue and governed by Section 71(3) read with the Companies (Share Capital and Debentures) Rules, 2014. Sixth, debentures are transferable — by an instrument of transfer for registered debentures, or, where held in dematerialised form, electronically through a depository. Finally, on the company's winding up, a debenture-holder ranks as a creditor and is paid out of the company's assets ahead of every class of shareholder, because a debenture-holder's claim is a liability of the company, never a share of its ownership.