The following are the features of Debentures:

(A) The payment of interest is a charge on profits and is to be paid even if there is no profit.

(B) The debentures, which are issued for a specified period are repayable on the expiry of that period.

(C) If the debentures are generally secured, they carry a fixed or floating charge over the assets of the company.

(D) Debentures can not be converted into shares in any case.

Choose the correct answer from the options given below:

Let me examine each statement about debentures:

Statement (A): The payment of interest is a charge on profits and is to be paid even if there is no profit.

Correct. Debenture interest is a contractual obligation and must be paid irrespective of profit or loss. It is treated as a charge against profit (expense) in the Statement of Profit and Loss.

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Statement (B): The debentures, which are issued for a specified period are repayable on the expiry of that period.

Correct. Redeemable debentures have a fixed maturity period. The company must repay the principal amount to debenture holders at the end of this specified period.

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Statement (C): If the debentures are generally secured, they carry a fixed or floating charge over the assets of the company.

Correct. Secured debentures are backed by company assets. The charge can be:

• Fixed charge → on specific identifiable assets (like land, building)
• Floating charge → on changing assets (like inventory, debtors)

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Statement (D): Debentures can not be converted into shares in any case.

Incorrect. Companies can issue convertible debentures which give holders the right to convert their debentures into equity shares after a specified period, as per predetermined terms.

Since statements (A), (B), and (C) are correct while (D) is incorrect, Option 2 is the right answer.