Debenture can be redeemed in various ways by a company. It can pay a lump sum on the date of maturity or may pay in annual installments. A company can also purchase it from the open market or convert to an equity share in case of convertible debentures. Innovative ways like call or put option can also be utilized.
Can debentures be redeemable?
Redeemable debentures carry a specific date of redemption on the certificate. The company is legally bound to repay the principal amount to the debenture holders on that date. On the other hand, irredeemable debentures, also known as perpetual debentures, do not carry any date of redemption.
Why can debentures be redeemed at discount?
Unlike shares, a company can issue debentures at a discount which is called “Debentures issued at Discount”. Giving debentures at a discount increases the capital of the company with respect to the less increase in the Cash for it.
Can I redeemed debentures before maturity?
Normally the debentures are redeemed by company at the expiry of their life by giving away the amount promised for. But sometimes company reserves the right to redeem the debentures even before the expiry of their life either by installments or by purchasing them from open market.
Why debentures should be redeemed?
A debenture redemption reserve (DRR) is a requirement imposed on Indian corporations that issue debentures. A DRR requires the corporation to create a debenture redemption service to protect investors from the possibility of a company defaulting.
What is difference between share and debenture?
Share is the capital of the company, but Debenture is the debt of the company. The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtedness of the company. The income earned on shares is the dividend, but the income earned on debentures is interest.
Are debentures equity?
Convertible debentures are bonds that can convert into equity shares of the issuing corporation after a specific period. … However, the holders of the debenture have the option of holding the loan until maturity and receive the interest payments or convert the loan into equity shares.
Can debentures can be redeemed at discount?
No, debentures issued at premium or par cannot be redeemed at discount because redemption of debentures at discount implies that the debentureholders are getting lesser than what they have earlier invested at the time of issue.
What is not a type of debentures?
6. Non-redeemable Debentures: Non-redeemable Debentures cannot be redeemed in a Company’s lifetime. Non-redeemable Debentures are only paid back on company’s liquidation.
Why is debenture issued?
Debentures. Debentures generally have a more specific purpose than other bonds. While both are used to raise capital, debentures typically are issued to raise capital to meet the expenses of an upcoming project or to pay for a planned expansion in business.
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Do debentures expire?
These debentures are issued for a specified period of time. On the expiry of that specified time the company has the right to pay back the debenture holders and have its properties released from the mortgage or charge. Generally, debentures are redeemable.
What is debenture and its redemption?
Redemption of Debentures means repayment of the amount of. debentures to the debenture holders. It implies of the principle amount as well as interest due on. debentures to the debenture holders. In other words, it refers to the discharge of liability on debentures.
Which company redeemed debentures?
| Particulars | Company ABC | Company XYZ |
|---|---|---|
| Value | Rs.10 lakh | Rs.10 lakh |
| Interest rate | 6% | 7% |
| Date of repayment | 1st April 2025 | 1st May 2025 |
How do you make a debenture?
You need to have the usual trading and a demat account to buy a non convertible debenture (NCD). The process to buy a NCD is the same as that for a share. You log into your trading account or ask your broker to buy you an NCD on your behalf. The manner in which you buy and the brokerage is the same as that for shares.
When debentures are redeemed account is debited?
When all the debentures are redeemed, the Debenture Redemption Reserve Account is closed by transferring to General Reserve Account. The following journal entries will be passed: Illustration 1: A Limited Company has a balance of Rs 1, 00,000 at the credit of Profit and Loss Account.
How DRR is created?
Creation of DRR
In case, Debentures are redeemed out of profits only, DRR is created by transferring an amount that is equal to 100 per cent of the nominal(face) value of the total outstanding debentures.