A type of debt-creating instrument, such as a promissory note, that is not secured by a physical asset or other collateral. Companies and governments often rely on this type of instrument in order to secure capital.
Definition from Nolo’s Plain-English Law Dictionary
A type of bond (an interest-bearing document that serves as evidence of an investment or debt) that does not require security in the form of a mortgage or lien on a specific piece of property. Repayment of a debenture is guaranteed only by the general credit of the issuer. For example, a corporation may issue a secured bond that gives the bondholder a lien on the corporations factory. But if it issues a debenture, the loan is not secured by any property at all. When a corporation issues debentures, the holders are considered creditors of the corporation and are entitled to payment before shareholders if the business folds.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:14 pm