Key features of debentures
Key features of debentures

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Key features of debentures
  • What is a debenture and when do you use one?
  • Who can grant debentures?
  • Formalities for debentures
  • Security created by a debenture—an umbrella document
  • Legal principles
  • Fixed security—mortgages
  • Fixed security—assignments of contractual rights and rights under insurance policies
  • Fixed security—fixed charges
  • Floating security
  • more

Debentures are used in many types of financing where it is desirable to take security over all of the assets of a particular entity. They are a form of umbrella document, incorporating many types of security over a broad range of assets.

What is a debenture and when do you use one?

What is a debenture?

In the context of secured lending, the term 'debenture' means a form of security agreement that grants security interests over a broad range of the security provider's assets as collateral for either the security provider's own obligations or the obligations of a third party.

The term 'debenture' can also refer to a document that either creates or acknowledges a debt.

This Practice Note deals with debentures as a form of security in the context of secured lending. In particular, it considers:

  1. the formalities required for a debenture

  2. the legal principles to be considered

  3. the fixed security normally secured in a debenture

  4. the floating security under a debenture

  5. perfecting the security, and

  6. enforcing debentures and floating charges

When do you use one?

Debentures are used where the lender wants to take security over all of the assets of a particular entity. It is possible to exclude certain assets from a debenture but this can result in loss of the right to appoint an administrator out of court pursuant