Question:
____ debentures refer to those debentures where a charge is created on the assets of the company for the purpose of payment in case of default.
____ debentures refer to those debentures where a charge is created on the assets of the company for the purpose of payment in case of default.
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A charge on the assets of the company means the debentures are backed by security. Name that type.
Updated On: Oct 26, 2026
- Unsecured
- Secured
- Convertible
- Registered
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The Correct Option is B
Solution and Explanation
Step 1: Read the clue:
The question says a charge is created on the assets of the company. The charge is for payment if the company fails to pay.
So the debenture holders have a claim on specific assets. This is the feature we must name.
Step 2: Recall the meaning:
A debenture is secured when the repayment of the money and the interest is backed by a charge on the assets of the company.
If the company defaults, the holders can sell the charged assets to recover their money. Such debentures are called secured debentures.
Step 3: Why the other options are wrong:
Option (A) Unsecured: these have no charge on any asset. Holders rank like ordinary creditors, which is the opposite of the clue. Wrong.
Option (C) Convertible: these can be changed into equity shares after a stated time. This is about conversion, not about a charge on assets. Wrong.
Option (D) Registered: the name of the holder is entered in the register of the company. This is about who owns the debenture, not about security. Wrong.
Final Answer:
The blank is filled by Secured, which is option (B).
The question says a charge is created on the assets of the company. The charge is for payment if the company fails to pay.
So the debenture holders have a claim on specific assets. This is the feature we must name.
Step 2: Recall the meaning:
A debenture is secured when the repayment of the money and the interest is backed by a charge on the assets of the company.
If the company defaults, the holders can sell the charged assets to recover their money. Such debentures are called secured debentures.
Step 3: Why the other options are wrong:
Option (A) Unsecured: these have no charge on any asset. Holders rank like ordinary creditors, which is the opposite of the clue. Wrong.
Option (C) Convertible: these can be changed into equity shares after a stated time. This is about conversion, not about a charge on assets. Wrong.
Option (D) Registered: the name of the holder is entered in the register of the company. This is about who owns the debenture, not about security. Wrong.
Final Answer:
The blank is filled by Secured, which is option (B).
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