Editing Debenture (section)

{{Short description|Debt instrument}}
{{For|debentures in sport|debenture (sport)}}
{{Economics sidebar}}
In [[corporate finance]], a '''debenture''' is a medium- to long-term debt [[financial instrument|instrument]] used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with '''[[bond (finance)|bond]]''', '''loan stock''' or '''note'''. A debenture is thus like a certificate of loan or a loan bond evidencing the company's liability to pay a specified amount with interest. Although the money raised by the debentures becomes a part of the company's [[capital structure]], it does not become [[share capital]].<ref name="Legal Services India">[http://www.legalserviceindia.com/articles/debentures.htm Legal Service India]</ref> Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.

Debentures are freely [[assignment (law)|transferable]] by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of [[shareholder]]s, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's [[financial statements]].

The term "debenture" is more descriptive than definitive. An exact and all-encompassing definition for a debenture has proved elusive. The English commercial judge, [[Nathaniel Lindley, Baron Lindley|Lord Lindley]], notably remarked in one case: "Now, what the correct meaning of 'debenture' is I do not know. I do not find anywhere any precise definition of it. We know that there are various kinds of instruments commonly called debentures."<ref>{{Cite web |title=DEBENTURES |url=https://www.lawyersnjurists.com/article/debentures/ |access-date=2022-11-22 |website=The Lawyers & Jurists}}</ref>