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Can anyone tell me.. what is meant by issue of debentures as a Collateral security

Posted by Kumari Nutan 7 years ago

CBSE > Class 12 > Accountancy

1 answers

Gaurav Seth 7 years ago

Issue of Debentures as Collateral SecurityWhen a company takes a loan, it may provide primary security on its assets. However, the lending institution may insist on some more assets as secondary or collateral security. In such a situation, the company may issue debentures to the lender as secondary or collateral security, such an issue of debentures is known as ‘debentures issued as collateral security’.
If the company fails to repay the loan along with the interest and the primary security is insufficient to repay the loan, only in that case the lender is free to use the debentures as collateral security. The lender may either present such debentures for redemption or sell them in the open market.

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CBSE > Class 12 > Accountancy

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