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1. General Issuance of Debentures According to section 83(1) of the Companies Act, 2019 (Act 992), a company may raise loan capital by issuing (a) a single debenture, (b) a series of debentures, or (c) debenture stock. Debentures function as formal acknowledgments of indebtedness. Where the company issues a series of debentures, all such debentures in the series rank equally, even if issued on different dates (section 83(2)). Instead of issuing individual debentures, a company may choose to fund its borrowing through debenture stock. In that case, the stock is created in a prescribed amount and then apportioned in parts (represented by stock certificates) to various holders (section 83(3)). 2. Creation and Execution Debenture stock is created by a deed under the company’s common seal or by a deed poll or indenture certified by two directors and the Company Secretary (section 83(4)). This ensures authenticity and provides a clear framework for the legal relationship between the company and its lenders. 3. Status and Rights of Debenture Holders A holder of a debenture does not become a member of the issuing company. Therefore, being a debenture holder does not entitle one to attend or vote at company general meetings (section 83(5)), even if the debenture instrument or the company’s constitution says otherwise. 4. Specific Performance of Debenture Contracts Section 84 provides that a contract to take up and pay for debentures can be enforced by an order of specific performance. This provision affirms the seriousness of commitments to purchase or subscribe to debentures, allowing a court to compel performance where necessary. 5. Documents of Title and Delivery Obligations Under section 85(1), companies must, within two months of the allotment or registration of the transfer of debentures, deliver the appropriate certificates (debenture certificates or debenture stock certificates) to registered holders. If a certificate is defaced, lost, or destroyed, the company must issue a certified copy or a renewal upon the payment of a reasonable fee and proof of entitlement (section 85(2)). Failure to comply triggers an administrative penalty against both the company and its officers (section 85(3)). A holder who does not receive the relevant certificate may apply to court, which can order the company to deliver it and possibly bear the costs of the application if it is found to be at fault (section 85(4)). 6. Legal Effect of Statements in Debentures Section 86 clarifies that any statement contained in a debenture (or debenture stock certificate) is prima facie evidence of the named holder’s title and of the amount secured. If a person, acting in good faith, relies on the correctness of those statements and suffers a loss when the company later denies that correctness, the company is legally prevented (estopped) from doing so. In such cases, the company must compensate the individual for any loss flowing from that reliance. 7. Perpetual Debentures Under section 87, debentures may be made irredeemable or may be redeemable only upon a specified contingency, even if that contingency is remote or very long-term. Such a clause is not invalid solely because of the remoteness of the event or the extended redemption period. 8. Convertible Debentures Section 88 states that debentures may be issued with the option to convert them into shares in lieu of redemption or repayment. Conversion can be at the option of either the holder or the company, subject to any requirements in the Central Securities Depository Act, 2007 (Act 733). 9. Secured or Unsecured Debentures Debentures can be secured or unsecured (section 89(1)). Where secured, the security may be in the form of a fixed charge on specific property of the company or a floating charge on the company’s entire undertaking and assets (section 89(2)). The timing and conditions under which the charge becomes enforceable are typically set out in the debenture or any deed securing it. If debentures are secured by a charge, sections 110 to 121 of Act 992 on registration of particulars of charges apply (section 89(5)). 10. Floating Charges and Crystallisation A floating charge (section 90(1)) covers the entirety or a specified part of a company’s assets, both present and future, while allowing the company to use or deal with those assets in the ordinary course of business. The charge “crystallises” and becomes a fixed charge upon certain events—for example, if a receiver is appointed or if the company goes into liquidation (section 90(2) and (3)). If a receiver is withdrawn before discharge of the debt, the charge reverts to floating status (section 90(4)). Generally, a fixed charge has priority over a floating charge unless the floating charge terms prohibit subsequent charges that outrank it, and the later chargee had actual notice of that prohibition (section 90(5)).