The following are the features of Debenture:

(A) Debentures can be converted into shares if the terms of issue are so provided, and in that case these are known as convertible debentures.

(B) Debentures are generally secured and carry a fixed or floating charge over the assets of the company.

(C) The rate of interest on debentures may vary from year to year depending upon the profits of the company.

(D) The debentures are issued for a specified period and repayable on the expiry of that period.

Choose the correct answer from the options given below:

(A), (B) and (D) only

The correct answer is option 2- (A), (B) and (D) only.

(A) Debentures can be converted into shares if the terms of issue are so provided, and in that case these are known as convertible debentures. IT IS TRUE. Convertible debentures can be converted into equity shares or other securities, either at the discretion of the company or the debenture holders. These debentures can be fully or partially convertible.

(B) Debentures are generally secured and carry a fixed or floating charge over the assets of the company. IT IS TRUE. Secured debentures refer to those debentures where a charge is created on the assets of the company for the purpose of payment in case of default. The charge may be fixed or floating. A fixed charge is created on a specific asset whereas a floating charge is on the general assets of the company. The fixed charge is created against those assets which are held by a company for use in operations not meant for sale whereas floating charge involves all assets excluding those assigned to the secured creditors.

(C) The rate of interest on debentures may vary from year to year depending upon the profits of the company. IT IS NOT TRUE. The rate of return on shares may vary from year to year depending upon the profits of the company but the rate of interest on debentures is prefixed. The payment of dividend is an appropriation of profits, whereas the payment of interest is a charge on profits and is to be paid even if there is no profit.

(D) The debentures are issued for a specified period and repayable on the expiry of that period.  IT IS TRUE. Debenture 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 or at the option of the company and for payment of interest at a fixed rate payable usually either half-yearly or yearly on fixed dates. The amount of shares is not returned during the life of the company, whereas, generally, the debentures are issued for a specified period and repayable on the expiry of that period.

THUS, THE CORRECT ANS IS A, B & D.