What is a debt indenture?

What is a debt indenture?

An indenture is a legal contract that reflects or covers a debt or purchase obligation. It specifically refers to two types of practices: in historical usage, an indentured servant status, and in modern usage, it is an instrument used for commercial debt or real estate transaction.

What is an indenture security?

A trust indenture is an agreement in a bond contract made between a bond issuer and a trustee that represents the bondholder’s interests by highlighting the rules and responsibilities that each party must adhere to. It may also indicate where the income stream for the bond is derived from.

What is a master indenture?

The master indenture enables members of multiinstitutional health care systems to finance capital programs and expansions by borrowing on the basis of systemwide revenues and assets. In contrast, members of an obligated group have direct joint and several liability for master indenture notes.

Why would a company take out a debenture?

It gives the lender security over the borrower’s assets. Typically, a debenture is used by a bank, factoring company or invoice discounter to take security for their loans. A director who has advanced or lent money into their own company could take a debenture to secure the loan.

How do floating charges work?

How do floating charges work? A floating charge can be held over all of the company’s assets, or certain classes of asset, and these can be moved or sold in the course of normal business. When a company enters insolvency, the floating charge is said to ‘crystallise. ‘

What do you mean by floating charge?

While a fixed charge is attached to an asset that can be easily identified, a floating charge is a charge that floats above ever-changing assets. The floating charge, or a security interest over a fund of changing company assets, allows for more freedom for a business, than the lender.

What does a charge against a company mean?

A charge, or mortgage, refers to the rights a company gives to a lender in return for a loan. The rights are often in the form of security given over a company asset or group of assets.

Why would a bank put a charge on a company?

When a company borrows money, the lender / bank usually takes some security for that debt. This is designed to protect the lenders’ position and also to try and get the lenders’ money back if the borrower fails. These types of security are termed fixed and floating charges.

Why do companies have charges against them?

When a company borrows money to purchase a fixed asset such as land, a building, or piece of machinery, the lender will require security in the form of a fixed charge. This protects them from the risk of non-payment, and allows repossession and sale of the item if the borrower enters insolvency and is liquidated.

What are company legal charges?

MEANING OF CHARGES – The Companies Act, 2013 defines a Charge as an interest or lien created on the assets or property of a Company or any of its undertaking as security and includes a mortgage U/s 2(16). In the earlier Act of 1956, the word “Mortgage” was not mentioned.