Remedies of Debenture Holders

A debenture holder who wishes to release his security and recover his money may make use of all or any of the following remedies:

a) He may sue on behalf of himself and all other debenture holders to obtain payment or to enforce his security by sale. The Courts will appoint a Receiver and a manager for the company's business, if necessary, and declare the debentures to be a charge on the assets of the company, and order the sale of the property.

b) He may appoint a Receiver, if the conditions of the issue of the debentures give him the power to do so. The Receiver will sell the property and the sale proceeds will be utilised for the payment of the principal sum, interest, and costs due to debenture holders.

c) He may apply to the Courts for the foreclosure of the company's rights to redeem the debentures. This remedy is not common, as it is necessary for all the debenture holders of every class to be parties to the court action.

d) He may as a creditor for the principal and interest thereon, present a petition for the winding up of the company, or if there be a winding up in progress, he can prove in the winding up for the amount due to him, but not having any security, he ranks merely with the ordinary creditors.

e) He may have the property sold by the trustees if the debenture trust deed permits the sale.

f) If the company is being wound up and his security is insufficient he may value his security and prove for the whole debt.