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3. Types of Debentures on the basis of Permanence

In terms of permanence and duration, debentures are of the following types:
a) Redeemable Debentures: These debentures are redeemable on a specified date. For
example, if a debenture’s maturity period is 5 years, it becomes redeemable on the expiry of 5
years. These 5 years will start from the date of issue of the debenture.

b) Irredeemable Debentures: Irredeemable debentures do not have a specific maturity date.
They last throughout a company’s lifetime. Thus, the company redeems them only when it
faces liquidation.

4. Types of Debentures on the basis of Negotiability
The aspect of negotiability basically relates to transferability. This ground differentiates
debentures on the basis of whether they are freely transferable. It divides debentures on the
following two grounds:

a) Registered Debentures: As the name suggests, the details of these debenture holders are
registered in the company’s records. Only the debenture holders can redeem these debentures.
Hence, they are not freely transferable. They can be transferred only if relevant provisions of
the Companies Act, 2013 are fulfilled.

b) Bearer Debentures: Companies do not register details of debenture holders in this case.
They can be redeemed by the person owning them, without their identity being checked. This
happens because these debentures are freely transferable. Thus, anybody can sell and buy
them from their holders.
5. Types of Debentures on the basis of their Priority

Just like shares, companies rank debentures also in terms of priority. Investors prefer buying
instruments having priority because it helps them reduce their risks. Debentures can be of the
following two types in this case:
a) First Mortgage Debentures: As the name suggests, companies repay these debentures first.

Debenture-holders get their money before all others in their category.
b) Second Mortgage Debentures: These debentures are repaid only after the first mortgage
debentures are satisfied.

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