What is debt financing for a company?
Debt financing is money a company borrows and agrees to repay. The lender is a creditor. The company does not issue shares for that money, and the lender does not become a shareholder by the loan alone.
What is the borrowing?
A bank term loan, a working-capital limit, and a debenture that must be redeemed are debt. The contract states the amount, the repayment, and any security. Where the security is a charge on the company’s assets, registration of that charge is on the charge page. This page does not quote an interest rate.
When do shareholders vote?
The board borrows. Section 180 does not apply to a private company. A public company needs a special resolution when the borrowings would exceed the aggregate of paid-up share capital, free reserves, and securities premium. A loan inside that line does not need that resolution.
What is it not?
It is not venture capital. That funding is equity, on the venture-capital page. It is not, by itself, a deposit from the public. What is reported as a loan that is not a deposit is on the DPT-3 page.
Frequently asked questions
Four questions cover shares, a shareholder vote, a bank loan, and the interest rate.
Is an issue of shares debt?
No. Shares are equity. The holder is an owner, not a lender who is owed a repayment date.
Does every loan need a shareholder vote?
A private company is outside section 180. A public company needs a special resolution when total borrowings would exceed paid-up share capital, free reserves, and securities premium. A smaller borrowing by a public company can be a board decision.
Is a bank loan a public deposit?
No. A loan from a bank is not a deposit accepted from the public. Amounts that are outstanding and are not deposits are reported on Form DPT-3.
Does this page state an interest rate?
No. The rate is the rate in that loan. This page does not quote one.
Sources
Borrowing limits for the board are section 180 of the Companies Act, 2013. A charge given for the loan is a separate filing. Venture capital is equity.