Which of the following are facts about Debentures? (A) The specified…

Which of the following are facts about Debentures?

(A) The specified rate of interest on debentures is called the coupon rate
(B) Convertible debentures can be converted into equity shares
(C) Debenture holders are the owners of a company
(D) Debenture includes debenture stock and bonds
(E) Irredeemable debentures are also known as perpetual debentures

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A), (B), (D) and (E) only

A debenture is an acknowledgement of a debt: its holder is a creditor who earns a fixed rate of interest, not an owner of the company.

(A) The specified rate of interest on debentures is called the coupon rate — Correct. Specific coupon rate debentures carry a stated rate of interest, called the coupon rate.

(B) Convertible debentures can be converted into equity shares — Correct. They may be converted fully or partly into equity shares, as the terms of issue provide.

(C) Debenture holders are the owners of a company — Incorrect. Debenture holders are creditors; shareholders are the owners.

(D) Debenture includes debenture stock and bonds — Correct. Section 2(30) of the Companies Act, 2013 includes debenture stock and bonds in the term ‘debenture’.

(E) Irredeemable debentures are also known as perpetual debentures — Correct. The company gives no undertaking to repay them during its life.

Note: The book’s text of section 2(30) prints “Debenture Inventory”; the Act’s word is “debenture stock”.

NCERT (2026-27 edition):
From Coupon Rate Point of view – “Specific Coupon Rate Debentures: These debentures are issued with a specified rate of interest, which is called the coupon rate.”

NCERT (2026-27 edition):
From the Point of view of Convertibility – “Convertible Debentures: Debentures which are convertible into equity shares or in any other security either at the option of the company or the debentureholders are called convertible debentures.”

NCERT (2026-27 edition):
Distinction between Shares and Debentures – “Ownership: A ‘share’ represents ownership of the company whereas a debenture is only acknowledgement of Debt.”

NCERT (2026-27 edition):
Meaning of Debentures – “… 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.”

NCERT (2026-27 edition):
From the Point of view of Tenure – “… Irredeemable Debentures: Irredeemable debentures are also known as Perpetual Debentures because the company does not give any undertaking for the repayment of money borrowed by issuing such debentures.”