Question

Which of the following is not a characteristic of Bearer Debenture? 
 

• A. They are treated as negotiable instruments.
• B. Their transfer requires a deed of transfer.
• C. They are transferable by mere delivery.
• D. The interest on it is paid to the holder irrespective of identity.

Hint:

Bearer Debentures are like "Cash" (No records). Registered Debentures are like "Property" (Official records/deeds required).

Answer 1

The Correct Option is B

Concept: Debentures classified by transferability fall into two categories: Registered and Bearer. Bearer debentures are instruments where the company does not record the owner's name in its books.

Step 1: Analyzing the characteristics of Bearer Debentures.
• Negotiable Instruments: They are considered negotiable because they can be passed like currency.
• Transfer by Delivery: Ownership changes simply by handing the physical certificate to another person. No formal registration is needed.
• Interest Payment: Interest is paid to whoever presents the interest coupons attached to the debenture, regardless of who they are.

Step 2: Identifying the incorrect characteristic. A "Transfer Deed" is a formal legal document used for Registered Debentures to update the company's official records. Since Bearer Debentures aren't registered, they do not require a deed. Therefore, statement (B) is not a characteristic of Bearer Debentures.