A debenture is a long term loan which is usually secured against a specific asset (e.g. the factory) or the overall assets of a business. A debenture is repayable at a fixed date and has a fixed rate of interest.
Debentures are different from ordinary shares because:
The lender has no voting rights in the company.
The loan attracts interests – whereas holders of ordinary shares get dividends.
The providers of loans are paid out before ordinary shareholders in the event that the business fails (assuming there is some cash left).
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