A debenture is a formally drafted document which is either used to create or register a debt or acknowledge it. A debenture is basically a long term debt instrument which is used by companies or corporations to borrow money. This is a commonly used term and can also be replaced by the terms ‘bond’, ‘note’ or even ‘stock’ in certain cases. One can say that a debenture is a document which acts like a certificate which makes an acknowledgement of the fact that a company is liable to pay back a specific amount of money and the interest charged on it.
The person or party who has borrowed an amount or debenture is known as the debenture holder of the company from whom the money is borrowed. But debenture holders do not have a right to vote or make decisions in the company’s meetings. It is important to know that a debenture does not become a part of the share capital.
[Also Read: Debenture Conversion Agreement]
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