Issue of Debentures – Basic Concept
Debenture is an instrument, which acknowledges a debt due from a company. It is issued under the common seal of the company and is duly signed by authorized signatory. It is an agreement for the repayment of principal sum of debenture and interest at a specified rate on a specified date. There are two stages in the cycle of a debenture: a) issue of debentures and b) redemption of debenture.
Procedure for issue of debentures
The procedure for issue of debentures is similar to issue of shares. First of all, a prospectus is issued in which terms and conditions of the issue are mentioned. After issuing prospectus, applications are received from the interest investors along with the application money. The company has the option to either call the full amount of debentures or to call the amount in installments.
The debentures can be issued at par, premium, discount, for consideration other than cash or as collateral securities. The same has been explained as below: