Non-Profit Finances and Borrowing (Societies Act FAQs)

What are debentures?

A debenture is a debt instrument used to raise capital. Debentures are typically used to raise short term capital for specific purposes (for instance an upcoming expansion). Debentures are “unsecured” by collateral or assets, and are generally backed up by the creditworthiness of the borrower. Under the new Act, societies can borrow funds and issue debentures whenever the directors determine, unless it is prohibited by the bylaws. Under the current Society Act a special resolution was required for a society to issue a debenture. A society that wishes to can continue to limit the borrowing powers of the Board in its bylaws.

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