Bearer debentures are transferable by mere delivery, similar to currency notes or bearer cheques.
In registered debentures, the holder's name is recorded in the company's register, and their transfer requires execution of a transfer deed and registration with the company. This makes the transfer process formal and documented.
In contrast, bearer debentures do not have the holder's name registered with the company. Whoever physically possesses (bears) the debenture certificate is considered the owner. The debenture can be transferred simply by handing it over to another person—no paperwork or registration is needed.
Interest on bearer debentures is paid to whoever presents the interest coupons attached to the certificate, without any verification of identity.
First debentures and unsecured debentures are classified based on security and priority, not on the mode of transfer, so they are not relevant to this question.
The correct answer is Bearer debentures (Option 3).