What Are The Different Categories Of Debentures?

The debentures are classified on the basis of the terms and conditions of their issue by the company. The main categories of debentures are as under.

1. ORDINARY OR NAKED DEBENTURE.
Ordinary or naked debentures are those which do not carry any security in respect the repayment of interest or the principal. These have no priority and stand in the same position as any other unsecured creditors at the time of winding up the company.

2. MORTGAGE DEBENTURE.
A mortgage debenture is pone which is secured by a mortgage on the real property of the company. If the company fails to repay the borrowed amount at a specified period, the debenture holder has a legal right to sell the property and recovered the loan.

3. REDEEMABLE DEBENTURES.
The debenture which are repayable after the certain period are called redeemable debenture. The interest on the debentures is paid periodically but the principal amount is returned after a fixed period.

4. IRREDEEMABLE DEBENTURES.
A debenture which is not payable during the life time of the issuing company s called irredeemable debenture. These are payable either on the winding up of the company or at the time of any default on the part of the company.

5. REGISTERED DEBENTURES.
A register debenture is issued in the name of the owner of the debenture. The name of the owner thus appears on the face of the bound as well as on the books of the company.
6. BEARER DEBENTURES.
Bearer debentures do not show the name of the owner on the debenture. The holders of the bearer debenture are entitled to receive interest payment on the due dates.

1 simple or naked or unsecured debentures:
2 secured or mortgage debentures:
3 redeemable debentures:
4 irredeemable debentures:
5 bearer debentures:
6 registered debentures:
7 convertible debentures:

Ordinary of naked debentures are those which do not carry any security for the repayment of interest and the principle amount. A mortgage debenture is one which is secured by a mortgage on the real property of the company. If the company fails to repay the borrowed amount on maturity, the mortgage debenture holders have a legal right to sell the property and to recover the loan. The debenture which are repayable after a certain period of time are called redeemable debenture. The company mostly borrows money on redeemable debentures.

A debenture which is not payable during the running life of the company is called irredeemable debenture. These are payable either on the winding up of the company. A registered debenture is issued in the name of the owner of the debenture. The name of the owner thus appears on the face of the bond as well as in the books of the company.

The bearer debenture does not show the name of the owner of the bond. The holder of the bearer debenture is entitled to receive interest payment on the due date. The debenture which are issued to raise funds for the purchase of new equipments of a business are called equipment trust debenture.