Difference between Shares and Debentures

Basis	Shares	Debentures
1. Status	Shareholders are the real owners of the company. They provide ownership capital which is not refundable during the lifetime of the company.	Debenture holders are the creditors of the company. They provide loans generally for a fixed period, which the company has to paid back.
2. Nature of return on investment	Shareholders get dividend that depend on the profit of the company.	Interest is paid on debentures at a fixed rate. Interest is payable even if the company is running at a loss.
3. Rights	They have the right to vote and determine the policies of the company.	Debenture holders do not have the right to attend meetings of the company. So they have no say in the management of the company.
4. Security	No security is required to issue shares.	Generally debentures are secured. So, sufficient fixed assets are required when debentures are to be issued.
5. Order of repayment	Share capital is paid back only after paying the debenture holders and creditors.	Debenture holders have the priority of repayment over shareholders.
6. Risk	Risk is high due to uncertainty of returns.	There is little risk due to certainty of return.

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2024-08-24T12:31:08+00:00