ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Zenith Ltd issues debentures that are repayable on the date the company chooses to repay them, with no fixed redemption date, and the debenture holders cannot demand repayment while interest is paid on time. How are these debentures best described?
They are irredeemable (perpetual) debentures. There is no fixed date for repayment, and holders cannot demand their money back while interest is paid, so repayment usually arises only on winding up or default. Redeemable debentures would have a set repayment date or event.
- ARedeemable debentures
- BIrredeemable (perpetual) debenturesCorrect
- CConvertible debentures
Explanation
Debentures with no fixed repayment date, repayable only on winding up or default, are irredeemable or perpetual. Redeemable debentures have a set date or event for repayment. Convertible debentures give the holder an option to exchange into shares, which is not described here.
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