1. Redemption
(1) Type: The redemption (repayment) of debentures depends upon the type of debenture (irredeemable or redeemable) and terms of redemption (at par/ premium/discount).
Redeemable Debentures are to be redeemed (repaid) at a specified future date. The date of redemption is mentioned on the debenture certificate.
Irredeemable Debentures are not to be redeemable at all as long as the company exists. These are repaid only when the company is wound up or liquidated.
(2) Amount: If debentures are to be redeemed at their face value they
Are said to be redeemable at par.
If debentures are to be redeemed at an amount higher than their face value, they are said to be redeemable at a premium. Such premium payable on redemption is a capital loss for the company. Such premium through payable on redemption, must be provided as a liability at the time of issue itself.
If debentures are to be redeemed at an lower than face value, they are said to be redeemable at a discount. Such discount is a capital profit for the company. However, such debentures are rarely issued in practice.
