Shares and debentures both have a great contribution to a country’s economy. But there is some most important difference between shares and debentures which are described below:
Difference between shares and debentures
- Shareholders supply capital of the company
- Debenture holders provide debt to the company
- Shareholders are the owners of the company
- Debenture holders are the creditors of the company
- Shareholders enjoy profit
- Debenture holders get a limited rate of interest
- Shareholders are concerned about loss and profit
- Creditors are not concerned about loss and profit
- Managing the company:
- Shareholders do have a say in the management of the company.
- Debenture holders do not have any say in the management of the company.
- Meeting and election:
- Shareholders have a right to join in the company meeting and can take part in elections.
- Debenture holders do have no right to join in the company meeting or take the part election.
- Rights and obligations:
- Shareholder’s rights and obligations are written in the memorandum.
- Creditor’s rights and obligations are written in the articles.
- Sale of shares:
- A company can issue can shares at the start of the company or when it needs funds.
- Generally, after formation, a company can issue debenture to enhance loan.
Share is not a unique deed. A share certificate or warrant indicates its owner. A debenture is a unique deed. It indicates its ownership.
For selling a share it does not need any security.
For selling a debenture it needs to deposit a security
- Expression of decision:
- Shareholders can express their decision to the company.
- 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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