93. Register of debenture holders and copies of trust deed Flashcards
- Register of debenture holders and copies of trust deed
General overview
[93.01] The register of debenture holders has to be kept by a company at its registered office. It is not a public document and may be inspected by a registered debenture holder or shareholder of the company: s 93(5) and (6). The minimum information that a company has to divulge is the name of the debenture holder, his address and the debentures held by him.
Meaning of debentures
[93.02] The Act defines “debenture” as including debenture stock, bonds, notes and any other securities of a corporation whether constituting a charge on the assets of the corporation or not: s 4(1).
[93.03] A debenture means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a “debenture”. There is no precise legal definition of the term, it is not either in law or commerce a strictly technical term or what is called a term of art: Levy v Abercorris Slate and Slab Co (1887) 37 Ch D 260, Ch D . A more liberal outlook must be given to the term “debenture” to cover a wide range of forms and instruments introduced to meet the ever changing needs of modern day commerce, including any debt or obligation, covenant, undertaking or guarantee to pay or any acknowledgment thereof: Bensa Sdn Bhd v Malayan Banking Bhd [1993] 1 MLJ 119, HC. An instrument may be a debenture although it is not under seal and gives no security to creditors for the company’s obligations: British India Steam Navigation Co v IRC (1881) 7 QBD 165, QBD . Essentially, debentures do not include short term money market instruments such as cheques, letters of credit, bills of exchange or promissory notes having a face value of not less than $100,000 and having a maturity period of not more than 12 months: s 4(1). Debenture and debenture stock may be issued in bearer form (i.e. not requiring registration for legal effect), and may also be created on terms which make them negotiable instruments: Bechuannland Exploration Co v London Trading Bank [1898] 2 QB 658 ; Edelstein v Schuler & Co [1902] 2 KB 144, HC . A mortgage secured on the company’s properties for a long term of years is a debenture within the meaning of the UK Companies Act: Knightsbridge Estates Trust Ltd v Byrne & Ors (Trustees of Royal Liver Friendly Society) [1940] 1 AC 613, HL.
[93.04] The principle of jeopardy applies to a debenture, even though the debenture interest had been regularly paid, and no event had happened to entitle the debenture-holders to enforce their security, when the company’s assets are entirely worthless leaving only a reserve fund. The debenture-holders were entitled to have a receiver appointed: In re Tilt Cove Copper Co Ltd [1913] 2 Ch 588, Ch D . Cf In re New York Taxicab Co Ltd Sequin v the Company [1913] 1 Ch 1, Ch D , where a company is not being pressed or threatened by outside creditors, and there is no risk of its assets being seized on their behalf, the mere fact that the security of the debenture-holders is very inadequate is not a sufficient reason for appointing a receiver on the ground of jeopardy
Trustees of a debenture deed
[93.05] The trustee of a debenture deed guaranteed the registered holder payment of the principal and interest secured by the debenture if the company should make default, in consideration of an annual premium, and also an annual fee for acting as trustees. The trustee then re-insured part of their risk under their guarantee with another insurance company. Subsequently, both the company and the society went into liquidation, and the debentures remained unpaid. A debenture holder claimed to be entitled, as against the general creditors of the society, to the benefit under the re-insurance. It was held that that he was not so entitled. Although under the trust deed there was a fiduciary relation between the trustee and the debenture-holders, he was a stranger to the re-insurance contract. The trustees are entitled to recover the money from their re-insurers and to apply it to their own use as part of their general assets, and the holder of the debentures has no special claim on it: Law Guarantee Trust and Accident Society, In re Godson’s claim [1915] 1 Ch 341, Ch D. Where a trust fund is being distributed by the Court, a trustee-beneficiary against whom proceedings are pending for moneys alleged to belong to the fund cannot take any share until the amount (if any) due from him has been ascertained and made good
