Difference between Shares and Debentures

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

  • 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. Shareholders 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 in elections.
  2. Debenture holders do have no right to join in the company meeting or take the part election.
Difference between Shares and Debentures
Difference between Shares and Debentures
  • Rights and obligations:
  1. Shareholder’s rights and obligations are written in the memorandum.
  2. Creditor’s rights 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 funds.
  2. Generally, after formation, a company can issue debenture to enhance loan.
  • Indicate:

Share is not a unique deed. A share certificate or warrant indicates its owner. A 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. Shareholders 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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