4.15 Debenture: Issue, Formalities, Types, and Share vs Debenture

The debenture — the company's acknowledgment of debt under its seal: the bondholder is a creditor, not an owner; the instrument carries interest (fixed, not profit-dependent) and the repayment terms. The issue's formalities: the board's resolution (within the borrowing power), the trust deed and the debenture trustee (the holders' guardian — the Securities Act's discipline for the public issues), the registration of charges (the secured debentures' assets charge — the OCR/charge registry), the certificate, the listing where public. Types: secured vs unsecured (the charge's presence); convertible vs non-convertible (the equity-conversion option — the Nepali market's favourite hybrid); redeemable vs irredeemable (the perpetual face); registered vs bearer. Share vs Debenture (the exam table): | Point | Share | Debenture | |---|---|---| | Holder's position | Owner (member) | Creditor | | Return | Dividend (profit-dependent) | Interest (fixed, payable regardless) | | Voting | Yes (equity's default) | No | | Winding up | Last (the surplus) | Creditor's priority | | Security | None | Often charged on assets | | Redemption | Capital not returnable (except buy-back) | Repayable on terms |