Debenture Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Debenture, written in plain English, along with examples of how it is used.

What is Debenture?

debentures are kind of bonds floated by big companies or even government and used as long term debt intruments for fund raising. In case of bankruptcy the repayment to the investor comes from company’s capital evaluation.

History and Meaning of Debenture

Debentures have been used as a long-term debt instrument by large corporations and governments since at least the 17th century in Europe. These bonds are usually secured against the assets of the issuer and have a fixed interest rate. In case of default, the repayment to the investor comes from the issuer's capital evaluation. Debentures are different from other kinds of bonds in that they are not secured by any specific assets or property.

Examples of Debenture

  1. ABC Corporation issued $1 billion worth of debentures to finance the construction of a new production facility.
  2. The government of India raised funds through the issuance of debentures to support infrastructure development.
  3. Investors who hold debentures will receive regular interest payments until the bond matures.

Legal Terms Similar to Debenture

  1. Bond: a fixed-income instrument that represents a loan made by an investor to a borrower, typically a corporation or government. Bonds are similar to debentures in that they are a long-term debt instrument with a fixed interest rate.
  2. Note: a debt security similar to a bond or debenture but with a shorter maturity period.
  3. Mortgage: a legal agreement that allows a lender to take possession of a property if the borrower fails to meet the terms of the loan agreement. Mortgages may be secured or unsecured.