Q.Explain the different types of debentures on the basis of redemption and mode of transfer.
Two further, independent bases classify debentures by how and when they are repaid, and by how ownership passes from one holder to another.
On the basis of redemption, a redeemable debenture is repayable — either in a lump sum at the end of a fixed period, or in instalments spread over several years — according to the terms stated when it was issued; the great majority of debentures issued in practice are redeemable. An irredeemable (or perpetual) debenture carries no fixed date of repayment at all, becoming repayable only on the happening of a specified contingency, such as the company's winding up or a default in payment of interest — a rare category today, since a company almost always prefers to state a definite repayment obligation.
On the basis of mode of transfer, a registered debenture has the holder's name entered in the company's Register of Debenture-holders and is transferable only by executing a formal instrument of transfer, with interest paid to whoever is registered as the holder on the relevant date. A bearer debenture, by contrast, carries no such entry of the holder's name anywhere and is transferable merely by delivery of the certificate, exactly like a currency note; interest on a bearer debenture is collected through coupons physically attached to the certificate and presented for payment as each falls due.
By redemption: redeemable debentures are repaid on a fixed date, either in lump sum or by instalments; irredeemable (perpetual) debentures are repaid only on a specified contingency such as winding up or default. By mode of transfer: registered debentures are recorded in the company's Register of Debenture-holders and transferred by a formal instrument of transfer; bearer debentures are transferred by mere delivery of the certificate, with interest collected via attached coupons.
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