Question

Mention two characteristics of Debenture.

Hint:

Debenture = acknowledged debt, fixed interest, holder is a creditor, usually redeemable on a fixed date.

Answer 1

Step 1: State the first characteristic — nature of the instrument:
A debenture is a written acknowledgement of a debt/loan taken by the company, issued under its common seal, and it carries a fixed rate of interest payable regardless of whether the company earns a profit.

Step 2: State the second characteristic — status of the holder:
A debenture holder is a creditor of the company, not an owner — they have no voting rights, but they rank ahead of shareholders in getting paid when the company winds up.

Final Answer:
Two characteristics: (i) it acknowledges a debt and carries fixed interest, and (ii) the holder is a creditor with priority over shareholders on winding up.