ABSTRACT
A company requiring capital may in addition to issuing shares to members obtain loan capital from banks or other financial institutions through the issue of debentures. This chapter makes students know that debenture borrowing by a company is common with creditors virtually always taking security (fixed or floating charges). Private companies can borrow as soon as they are incorporated; public limited companies must wait until they receive a trading certificate to confirm that the capital requirements have been satisfied. Debentures can be issued to a specific creditor, such as a bank, or alternatively to represent a loan issued to the public which will be traded on the Stock Exchange in a manner similar to shares. As debentures do not form part of the capital of the company, unlike shares, they may be issued at a discount, unless the debenture issue allows an immediate right to convert into shares in which case a discount cannot be given.
