This is a medium to long term contract that is used by large companies, to borrow money and is in some countries the term is used interchangeably with bond, loan stock or note. The money raised by the debenture becomes a part of the firm’s capital structure, and will be repaid with interest at a later date. There are two types of debentures available with the first one called a convertible debenture, which means that the bond can be converted into equity shares into the company to add value and act as an incentive for potential buyers. Non-convertible debentures perform solely as a regular debenture, thus cannot be converted into equity shares into the company.

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