Difference between Shares and Debentures

Shares and debentures both has a great contribution in a country’s economy. But there are some most important difference between shares and debentures which are described below:

Difference between shares and debentures

  • Position:
  1. Shareholders supply capital of the company
  2. Debenture holders provide debt to the company
  • Ownership:
  1. Shareholders are the owners of the company
  2. Debenture holders are the creditors of the company
  • Profit:
  1. Shareholders enjoy profit
  2. Debenture holders get a limited rate of interest
  • Liability:
  1. Share holders are concerned about loss and profit
  2. Creditors are not concerned about loss and profit
  • Managing the company:
  1. Shareholders do have a say in the management of the company.
  2. Debenture holders do not have any say in the management of the company.
  • Meeting and election:
  1. Shareholders have a right to join in the company meeting and can take part election.
  2. Debenture holders do have no right to join in the company meeting or take part election.
Difference between Shares and Debentures

Difference between Shares and Debentures

  • Rights and obligations:
  1. Share holders rights and obligations are written in the memorandum.
  2. Creditor’s right and obligations are written in the articles.
  • Sale of shares:
  1. A company can issue can shares at the start of the company or when it needs fund.
  2. Generally after formation a company can issue debenture to enhance loan.
  • Indicate:

Share is not a unique deed. Share certificate or warrant indicates its owner. Debenture is a unique deed. It indicates its ownership.

  • Security:

For selling a share it does not need any security.

For selling a debenture it needs to deposit a security

  • Expression of decision:
  1. Share holders can express their decision to the company.
  2. Creditors cannot express their decision to the company.
  • Winding up:

A company has to return all the debts first and at last shareholders get their money. At first the creditors get their money and at last the shareholders are paid.

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1 comment for “Difference between Shares and Debentures

  1. adila
    October 3, 2016 at 10:48 AM

    Useful legal knowledge sharing, thanks and keep it up

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