A debenture is essentially an instrument of debt issued by a company. The Companies Act, 2013 provides an inclusive definition that has been amended by the Companies (Amendment) Act, 2017.
## Statutory Definition — Section 2(30)
'Debenture' includes:
Debenture stock
Bonds
Any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not
BUT excludes:
1. The instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 (i.e., commercial paper and similar instruments); and
2. Such other instruments as may be prescribed by the Central Government in consultation with the RBI.
## Visualising the inclusive/exclusive definition
INCLUDES
EXCLUDES
Debenture stock
Instruments under Chapter III-D of RBI Act (e.g., commercial paper)
Bonds
Other instruments as may be prescribed by CG in consultation with RBI
Any other instrument evidencing debt
## Issue of Convertible Debentures
Where the company proposes to issue convertible debentures (fully or partly convertible into shares), the issue must be approved by a Special Resolution passed at a General Meeting.
No voting rights can be attached to debentures — debenture holders are creditors of the company, not members.
Worked example
### Example 1
Example — Commercial Paper
Alpha Ltd. issues commercial paper of ₹50 crores under Chapter III-D of the RBI Act, 1934 to meet its short-term working capital needs.
Question: Will this be treated as a debenture under the Companies Act, 2013?
Answer: No. Commercial paper issued under Chapter III-D of the RBI Act is specifically excluded from the definition of 'debenture' under Section 2(30). Hence the provisions relating to debentures (e.g., DTD, debenture trustee, debenture redemption reserve) will not apply to it.
### Example 2
Example — Convertible Debentures
Beta Ltd. proposes to issue Compulsorily Convertible Debentures (CCDs) of ₹100 crores. The Board passes an ordinary resolution and issues the CCDs.
Answer: The issue is invalid. Section 71(1) requires that any issue of debentures with an option to convert (fully or partly) into shares must be approved by a Special Resolution at a General Meeting. An ordinary resolution is insufficient.
⚠️ Common exam mistakes
Treating commercial paper as a debenture — it is specifically excluded.
Granting voting rights to debenture holders — debentures cannot carry voting rights.
Issuing convertible debentures with only an ordinary resolution — a special resolution at a GM is required.
Bare-Act text Section 2(30) · Companies Act, 2013 · click to expand
Section 2(30): 'debenture' includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not: Provided that— (a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and (b) such other instrument, as may be prescribed by the Central Government in consultation with the Reserve Bank of India, issued by a company, shall not be treated as debenture.