Disadvantages of Debentures

The fixed interest charges become fixed burden on the company, which have to be paid even if there are no profits. Non-payment may lead to legal complications and may even end up in winding up of the company.
Use of debt financing increases the risk perception of the firm
A company whose earnings are not stable and involve high initial investment cannot use this source of funds.
Payment of interest on debenture is obligatory and hence it becomes burden if the company incurs loss.
Debentures are issued to trade on equity but too much dependence on debentures increases the financial risk of the company.
Redemption of debenture involves a larger amount of cash outflow.
During depression, the profit of the company goes on declining and it becomes difficult for the company to pay interest.