Irredeemable Debenture

Irredeemable Debenture is a very common concept in investments. Irredeemable Debenture is a type of debenture. Irredeemable Debenture is a bond which is issued by the Government which does not have a date for expiring or maturity. To be more specific, Irredeemable Debenture gives interest but will not be able to redeem at the face value. Irredeemable Debenture is payable when the company will be closed or at the time of winding up of the company. Irredeemable Debenture benefit is that, in this kind of debentures money will be held safe with the government and the full amount will be repaid back.

Characteristics of Debentures

1. Irredeemable Debentures must be in written format. An oral contract cannot be called as an irredeemable debenture.
2. Irredeemable debentures can act as an acknowledgment of indebtedness.
3.  An irredeemable debenture signed by two directors without a company seal is valid. Thus a seal is not very necessary for a valid debenture
4. Irredeemable Debentures are usually issued in series. Single debentures are also issued in rare cases.
5. A business organization also can issue irredeemable debentures without any undertaking to repay.
6. Irredeemable debentures will be paid after the company tenure.

More about Irredeemable Debentures

Irredeemable Debenture is unsecured in many cases. As irredeemable Debenture has no liens on the specific assets, there is no specific security provided to it. Irredeemable Debenture is secured by property which is not pledged anywhere. Irredeemable Debenture has no fixed date of redemption too which makes it a bit complex. Irredeemable Debenture is a debenture which is not paid during the time of a company. Irredeemable Debenture will be paid at the time of winding up.

Irredeemable Debenture can be issued by a company without an undertaking to repay it. Sometimes the time will be 100 years. Irredeemable Debenture holders can never be made to pay the amount forcefully. Irredeemable Debenture is contrary to callable bond. Irredeemable Debenture has to be paid at the time of company.

Irredeemable Debenture Disadvantages

  • Unsecured
  • No fixed rate of redemption
  • Is not callable
  • No guarantee of returns

Examples of Irredeemable Debentures

UK has many examples of irredeemable debentures. One of the examples is of railroad company debentures which have no specific date of maturity. It looks more like a preferred stock. Irredeemable debentures usually bear a very high rate of interest. This is a perpetual charge on the companies and that is why these are called perpetual debentures also. The issue of these kinds of debentures has been regulated by the law.