The Companies Act goes further and actually distinguishes between the types of instruments which form part of a debenture and those which are excluded from its scope as follows.
A debenture includes:
- a debenture stock;
- a convertible debenture;
- a bond or an obligation;
- a loan stock;
- an unsecured note; or
- any other instrument executed, authenticated, issued or created in consideration of such a loan.
The term debenture excludes the following:
- a bill of exchange;
- a promissory note;
- a letter of credit;
- an acknowledgement of indebtedness issued in the ordinary course of business for goods or services supplied; or
- a deposit certificate, pass book or other similar document issued in connection with a deposit or a current account at a banking company.
Debenture Holders’ Representative
Under the Companies Act, any transaction involving the issuance of debentures of the same class to more than 25 persons requires that a debenture holders’ representative (Representative) be appointed. The Representative’s role is to ensure that the debenture issuer complies with all the terms and conditions specified in the debt instrument for the debenture holder’s rights. The Representative, in other words, steps in the shoes of the debenture holders and acts in their interests and on their behalf to ensure that the issuer does not violate the terms and conditions of the debt instrument.
The appointment the Representative is made under an agency deed which is valid upon the signature of the Representative.
Who can act as one?
A notary, an attorney at law, a banking or insurance company, a qualified auditor, an investment trust company, or any other corporation or person who has been duly authorised by the Minister to whom the responsibility of corporate affairs is designated may act as a Representative.
Powers of a Representative
The powers of a Representative are listed in paragraph 3 of the Sixth Schedule of the Companies Act. In essence, a Representative is able to:
- act in his own name on behalf of the debenture holders;
- represent the debenture holders in all matters affecting the debentures and their rights and obligations under the agency deed; and
- enforce securities which have been offered.
One of the main advantages of having a Representative is that there is a primary contact in all matters affecting the debentures themselves and is much easier for the debenture holders to coordinate their actions, if need be, against the issuer in cases of default.