108 SECRETARIAL PRACTICE

Unsecured
Debentures.

Bearer
Debentures.

Debenture
Stock.

the debenture holders are good as against an execution
creditor or general creditors of the company [Davey v. William-
son (1898), 2 Q.B. 194].

But by s. 266 of the Act, a floating charge created within
six months of the commencement of a winding-up is only
good to the extent of the amount then actually advanced
to the company, with interest at 5 per cent., unless the
company was solvent at the date when the floating charge
was given. A floating charge may also, by s. 78, be postponed
to preferential creditors.

The term ‘naked debentures’ is frequently used to describe
debentures which are not secured by any charge. They are
simply promises under the seal of the company to pay a
certain sum. Being under seal, the debt is a specialty debt,
but the holder is merely an unsecured creditor of the com-
pany, and he cannot prevent the company, unless it is so
provided by the conditions of the debenture, from issuing
mortgage debentures which will rank in priority to his claim.

The holder may bring an action against the company for
the principal and interest due, and, if necessary, issue execu-
tion on his judgment ; or he may present a petition for winding-
up the company, either before or after obtaining judgment;
or, if a winding-up is in progress, he may prove for the debt
as an ordinary unsecured creditor.

Debentures, whether secured by a trust deed, or by a
charge, or unsecured, may be payable to the registered holder
or to bearer. A debenture to bearer is a negotiable instru-
ment and transferable by delivery, and is so treated by the
law merchant [Bechuanaland Exploration Co. V. London
Trading Bank (1898), 2 Q.B. 658].

Being a negotiable instrument, a debenture to bearer will
pass on delivery free from all equities between the company
and the original or intermediate holders, and the delivery by
the holder to the company of the debenture and the interest
coupons will be a good discharge to the company for the
principal and interest respectively.

" Debenture stock is a term used to denote the capital sum
lent to a company, which is usually secured by a trust deed
creating a mortgage or charge in favour of the trustees upon
the property forming the security. The trust deed usually
provides that each stockholder shall be entitled to a certificate
stating the amount of the stock to which he is entitled.
The trust deed further provides for a register of holders
being kept, and for transfers of the stock in certain fractions,
and usually contains provisions for repayment of the stock
and for enforcing the charge. The incidents of debenture