Debentures as Debt Instruments

Steps:

• Identify debentures as long-term debt securities issued by companies to raise funds.
• Distinguish debentures from equity shares: debentures represent loans, not ownership.
• Recall rights of debenture holders: they are creditors with fixed interest claims but no ownership privileges.
• Evaluate options based on legal and financial definitions of debentures.

Why B is correct:

• Debenture holders are creditors, not shareholders, so they lack voting rights at general meetings under company law.

Why the others are wrong:

• A: Debentures represent debt, not equity, as they do not confer ownership or profit-sharing rights.
• C: Debenture holders are entitled to repayment as per the debenture terms, not solely upon company liquidation.
• D: Debenture interest is a fixed obligation paid regardless of profits, unlike dividends on shares.

Final answer: B