What is meant by a Debenture?
The word debenture has been derived from a Latin word ‘debere’ which means to borrow. It is a written instrument acknowledging a debt under the common seal of the company.
It contains a contract for repayment of principal after a specified period or at intervals and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates. It is essentially loan capital raised by the company from the general public.
According to Section 2(30) of The Companies Act, 2013, ‘Debenture’ includes Debenture Inventory, Bonds and any other securities of a company whether constituting a charge on the assets of the company or not.
Explanation
The answer is derived from Section 2.1 'Meaning of Debentures' and the Summary provided in the context. It covers the etymology, the fundamental definition as an instrument acknowledging debt, the features regarding interest and repayment, and the legal definition under the Companies Act, 2013. This comprehensive coverage ensures the student secures the full 3 marks.