ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Zentra Ltd issues a debenture that is repayable on a fixed date and carries a set rate of interest. The document is a written acknowledgement of the company's debt and is not secured on any assets. How is this debenture best described?
The debenture is an unsecured, or simple, debenture. It evidences a debt with fixed repayment and interest but gives the holder no charge over company assets, so the holder ranks as an unsecured creditor if the company becomes insolvent.
- AA secured debenture with a fixed charge
- BAn unsecured (simple) debentureCorrect
- CA debenture with a floating charge
- DA convertible debenture
Explanation
A debenture is a document evidencing a company's debt. Where no security is given over company assets, it is an unsecured or simple debenture. The lender ranks as an unsecured creditor. Nothing in the facts suggests a charge or a conversion right.
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