Debenture (Ro.: obligaţiune/ titlu de creanţă, De.: ~e Schuldverschreibung, Fr.: débenture, n.f./ obligation non garantie, n.f., Gr.: ομόλογο, Cz.: dluhopis) (See also: bond, indenture, loan stock, note, security, security interest, stock, treasury bill, treasury bond) = a debt that is secured not by some specific asset(s) of the debtor, but rather by the debtor’s financial reputation and credit worthiness (credit rating); a document that evidences such a debt. 

In England debentures are usually secured by a lien over the debtor’s assets and unsecured debentures are called 'naked debentures'.

Convertible ~ (Ro.: obligaţiune/ creanţă convertibilă, De.: ~e Wandelschuldverschreibung, Fr.: débenture convertible, n.f./ obligation non garantie convertible, n.f., Gr.: ~με μετατρέψιμες ομολογίες ) = a debenture that its holder may request to exchange for (convert into) some other corporate security, for instance, a share of stock.

~ stock (Ro.: obligaţiuni (Br.)/ acţiuni (Am.) preferenţiale, De.: ~e Obligation mit Treuhandsicherung/ ~e Anleihe mit schwebender Belastung des Gesellschaftsvwermögens (Br.)/ ~e Vorzugsaktie (Am.), Fr.: débenture-action, n.f./ titre obligatoire, n.m., Gr.: ~ομολογιακό δάνειο) = a fund comprising the money borrowed by a public institution or by a private company, charged on its property. 

Senior ~ (Ro.: obligaţiune/ creanţă prioritară, De.: ~e vorrangigen Schuldverschreibung, Fr.: débenture de premier rang, n.f., Gr.: προνομιούχο ~ ) = a debenture that entitles its holder to be paid in full, prior to the holders of subordinated debentures.

Subordinated ~ (Ro.: creanţă subordonată, De.: ~e nachrangige Schuldverschreibung, Fr.: débenture subordonnée, n.f./ obligation non garantie de rang inférieur, n. f., Gr.: κοινό ~) = a debenture that does not entitle its holder to receive any payment before the holders of senior debentures are paid in full.


Useful links

Legislation - Law No 32 of 1 March 2006 on mortgage bonds, Romania [Romanian] - Companies Act 2006 (ss. 431-432 - Right of member or debenture holder to copies of accounts and reports; ss. 738-742 - General provisions on debentures; ss. 743-748 - Register of debenture holders; ss. 749-754 - Supplementary provisions on debentures; ss. 863-865, 882-883 - Company charges. Special rules about debentures; s. 990 - Debentures carrying voting rights), United Kingdom [English] - Canada Corporations Act (s. 3(1) - Definitions. Debenture; s. 16(1) - Incidental and ancillary powers; ss. 65-67 – Borrowing powers; s. 68 - Information as to mortgages and charges; s. 71(1) - Company’s register of mortgages; s. 73(1) - Right of debenture holders to inspect register; s. 73(2) - Copy of trust deed to be forwarded; s. 218(1) - Registration and transfer offices within and outside Canada; s. 218(2) - Books for entry of particulars of registrations and transfers), Canada [English] - Securities Act of 1933 (s. 2(a) (1) - Definitions. Security; s. 18(d) (1) - Definitions. Senior security), United States [English] - Securities Exchange Act of 1934 (s 3(1) (10) - Definitions and Application of Title. Security), United States [English]

Case Law

United Kingdom House of Lords - National Westminster Bank plc v. Spectrum Plus Limited & Ors, [2005] UKHL 41 - Bank of Scotland v. Hutchison Main & Co., [1914] UKHL 3

England and Wales Court of Appeal (Civil Division) - Bexhill UK Ltd. v. Razzaq, [2012] EWCA Civ 1376 - Fons Hf v. Corporal Ltd. & Anor, [2014] EWCA Civ 304 - Revenue and Customs v. Royal Bank of Scotland Plc, [2007] EWCA Civ 126

Scottish Court of Session - Carse v. Coppen, 1951 SC 233, 1951 SLT 145, [1950] ScotCS CSIH_5

U.S. Supreme Court - Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416 (1972) - Bazley v. Commissioner, 331 U.S. 737 (1947) - United States v. Leslie Salt Co., 350 U.S. 383 (1956) - Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U.S. 134 (1974)

U.S. Courts of Appeals - Broad v. Rockwell Intern. Corp., 642 F. 2d 929 (5th Cir. 1981) - Browning Debenture Holders' Committee v. Dasa Corp., 560 F. 2d 1078 (2nd Cir. 1977) - Cruden v. Bank of New York, 957 F. 2d 961 (2nd Cir. 1992) - Elliott Assoc. v. J. Henry Schroder Bank & Tr. Co., 838 F. 2d 66 (2nd Cir. 1988) - Pittsburgh Terminal Corp. v. Baltimore & OR Co., 680 F. 2d 933 (3rd Cir. 1982) - Van Gemert v. Boeing Co., 520 F. 2d 1373 (2nd Cir. 1975)

Organisations and associations - Australian Securities and Investments Commission (Australia) - Canadian Securities Administrators (Canada) - U.S. Securities and Exchange Commission (USA) - UK Financial Conduct Authority (UK) - UK Financial Services Authority (UK)

Online Publications - Debentures, Johannesburg Stock Exchange - Debentures, National Information Centre on Retirement Investments Inc. - Unlisted debentures, secured & unsecured notes, Money Smart


Bhagwat, Y., Gondhalekar, V., 2001, Shareholder Reward and its Impact on Capital Structure and Dividend Policy: Financial Innovation by Hindustan Levver Limited [available online at:]

Cappa, V., 1934, The Corporate Debenture System of South American Countries, The Yale Law Journal, Vol. 43, No. 4, pp. 571-598 [available online at:]

Chazen, L., Ross, L., 1970, Conversion-Option Debentures, The Yale Law Journal, Vol. 79, No. 4, pp. 647-656 [available online at:]

Ferran, E., Chan Ho, L., 2014, Principles of Corporate Finance Law, 2nd ed., UK, Oxford University Press

Flannery, M., 2002, No Pain, No Gain? Effecting Market Discipline Via 'Reverse Convertible Debentures' [available online at:] 

Jordan, H., 2010, Debentures and Other Charges, Gale Ecco, Making of Modern Law

Haas, J., 2010, Haas' Corporate Finance in a Nutshell, 2nd ed., USA, West Academic Publishing

Klein, W., Coffee J., Partnoy, F., 2010, Klein, Coffee and Partnoy's Business Organization and Finance, Legal and Economic Principles, 11th ed., USA, Foundation Press

Manson, E., 2010, The Debentures and Debenture Stock of Trading and Other Companies; with Forms Including Forms of Proceedings to Enforce Securities, Gale, Making of Modern Law

Simonson, P., 2010, The Debenture and Debenture Stock Holders’ Legal Handbook: with Appendix Containing Forms, Gale, Making of Modern Law

Stuber, W., 1978, Legal Memorandum: The Issuance of Debentures in Brazil, Lawyer of the Americas, Vol. 10, No. 1, pp. 245-252 [available online at:]


By Dmytro Galagan