Types of Debentures

[dewdrop]

In recent times a Shares Receiver has been appointed to some high profile businesses and on reading the headline one might think that the business being carried on was the subject of the receivership but on reading on this seems not to be the case. Can someone outline what gives rise to such events. I know the background to some businesses may involve a myriad of companies and there may be tax issues too.

 

[Brendan Burgess]

Anglo Irish Bank has appointed a share receiver over the Quinn family’s shares in the group.

A share receiver takes control of the shares only, and not the assets, businesses or employees of the Quinn Group. The share receiver has also been appointed to the Quinn family's international property group.

If a company X ltd defaults on its loans, the bank may appoint a receiver to the company. The receiver would run the company, sell off the assets and use the proceeds to repay the loans owed by the company.

But in the Quinn family case, The Quinn family borrowed from Anglo. They gave their shares as security. Quinn Ltd is not affected. So the Receiver was appointed over the shares.

a Shares Receiver has been appointed to some high profile businesses

So this is incorrect. The receiver was appointed to take the shares not the business

I am not sure about debentures. They seem to be just another word for a loan to a company.

In law, a debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.[1]
Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.

Brendan

 

[dewdrop]

Thanks Brendan. What concerned me was the heading on the RTE website "Receivers appointed to Whitfield Clinic". To the ordinary person who just read the headline this would give the impression that this business was in receivership