columbia wrote: »
This is taken from my book-keeping notes, hope it is okay to retype them on here!
Debentures - Also known as Loan Stock or Loan Capital
A debenture is a loan made to the business and will be repaid at a future date. It is different from an ordinary share which will normally never be repaid.
Interest is paid at the rate quoted and must be paid whether the company makes a profit or not. They are classed as business expenses (ie P&L) and again differ from dividends paid on shares which are paid out of profits (after net profit has been calculated) and might not be paid at all.
Debentures are issued as;
A company can borrow money by issuing debentures at a published rate of interest and stating the period for which they wish to borrow the money. Usually 2 dates are quoted eg 2009-2015 which shows the date of issue and the date of repayment.
No future date when the loan is redeemed is anticipated although they would be due for repayment in the event that the company went into liquidation.
These may be issued on the basis that the lenders have a legal right that, subject to certain situations they can take control of certain assets and sell them to recover their loan. These may also be known as mortgage debentures.
These have no charge over the assets of the company. They are also know as simple debentures.
columbia wrote: »
Hey I quoted verbatim, you don't expect me to understand it do you???!!!!!
Seriously though, I think the loan can be from anybody, although I am sure someone will correct me if I am wrong!
Bookworm55 wrote: »
How much detail do you want?
A debenture is a long-term loan. (ie non-current liability)
More specifically, a debenture is a document which creates or acknowledges a debt. It is a loan secured upon the assets of the company (rather than the assets of the shareholders or not being secured at all).
eep... the last three posts above arrived while I was deciding how much to write!