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TeachMeFinance.com - explain debenture Debenture -- Debt instrument evidencing the holder's right to receive interest and principal installments from the named obligor. Applies to all forms of unsecured, long-term debt evidenced by a certificate of debt. another definition... debenture -- an unsecured debt instrument or bond backed only by the general credit standing and earning capacity of the issuer. Debentures are used to obtain capital funds. historic definition... Debenture -- A certificate of debt issued by a corporation. Unless secured by a mortgage it is simply a promise to pay, or in other words, a promissory note. It differs from an income bond only in that it contains a promise to pay a certain amount of interest at stated periods. In Great Britain a debenture bond or stock is generally thought to be secured by mortgage on real property ; but this is not necessarily the case. -The word merely means a debt or promise to pay. By universal custom, however, the debenture bonds or stocks of British companies rank before the preference and ordinary capital ; and as a rule they are secured by a charge on the companies' real property. In Great Britain the chief difference between a debenture bond and a debenture stock is that a bond is for a fixed amount, while a stock is divisible and may be transferred in multiples of 1 pound or sometimes even in smaller amounts. Another important difference lies in the fact that a bond is generally a negotiable instrument, transferable by delivery, and is the property of the bearer, with interest coupons attached, while stock is registered in the name of the holder and is transferred by deed, the interest being forwarded to holders by the company. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.