A company traditionally has the power to borrow money for the purposes of its business. When a company acquires money from external sources for its business, it is raised either by equity financing or debt financing. Equity financing involves the issue of shares with the shareholders. Debt financing involves raising loans or money from the general public in the form of debenture issues.
Debentures S2 (1)
Following are the types of debentures:
- Debenture Stock
To ensure the security of principal amount, there are two types of charges over the company’s assets. These include:
- Fixed Charge
- Floating Charge
Register of debenture holder (S60(1)
Apart from the debentures transferable by delivery, the company issuing any other debenture is bound to keep a register of debenture holders under section (S60(1) of The Malaysian Companies Act 2016.
Annual Return of Company
Under section (S68(3)(f)) of The Malaysian Companies Act 2016, a company must disclose the summary of debenture and shareholding structure.
Debentures (Debt financing)
Creditors give loan to a company, which in return gives interest over the loan amount.
Note: A person won’t be termed as a secured creditor who just holds a debenture.
Shares (Equity financing)
During Shares or Equity Financing, investors give money to a company which in turn offers its ownership. This facility is only available with public limited companies, as private limited companies can’t offer their shares to the public.