A document that acknowledges and contains the terms of a loan (usually to a company). The loan may be unsecured (a naked debenture). More usually, however, the debenture will be subject to a charge and will contain the terms of the charge (e.g. the right to appoint a receiver or a crystallization event). Debentures may be issued to a single creditor or in a series to several creditors in order to raise finance for a company. In the case of the latter, a trust may be created and contained within the debenture in favour of such creditors. This enables the company to appoint a trustee for debenture holders to ensure that the financial activities of the company are managed in the interests of the group of creditors. Finance raised by the issue of debentures is known as loan capital. This is contrasted with share capital, the holders of which are company members.
Subjects: Law — Bibliography.