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Difference between shareholder and debenture

Post a Comment. According to professor L. B Grower, There are two classes of Company's securities, first class is described as shares and second as debentures. Share and debenture holders both invest their money into the company and both get returns on their investment.

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Difference between Shares and Debentures

A shareholder or member is joint owner of the company; but a debenture-holder is only a creditor of the company. A shareholder has a voting right whereas a debenture-holder has no such right at the meeting of the company.

Section of the companies act prohibits the issue of debentures carrying any kind of voting rights at general meeting of the company. Interest on debentures is payable whether there are profits or not. But dividend on shares is to be paid only when the company has earned profits. Interest on debentures may be paid out of capital but dividend on shares can never be paid out of capital.

Debentures are generally secured and carry a charge on the assets of the company whereas shares have no such charge.

The debenture-holder, being a secured creditor of the company, is paid-off prior to a shareholder in the event of winding up of a company. A company can repay the debentures in accordance with the terms of issue but save in the case of redeemable preference shares, the share capital cannot be repaid without legal formalities.

Debentures can be issued at a discount whereas shares cannot be issued at a discount except as provided under section79 of the companies act. Related posts: Brief note on three different types of Debentures What do you understand by dividend? What is the procedure for the issue of debentures in India? Short notes on the Capacity of parties holders in due course What are the remedies available for a debenture holder?

How a private company can be converted into a public company and vice-versa? What are the duties assigned to a company auditor?

Preference Shares vs. Debentures: What’s the Difference?

A debenture is a medium to long term debt instrument for a company, which is used to raise capital from the investors, at a fixed rate of interest. These are mostly repayable on a fixed date. When a portion of the capital is raised through the general public by way of a primary capital market it is termed share capital of the company.

Nowadays, investment in shares and debentures has taken a dominant position in the society, as people of different ages, religion, sex, and race invest their hard earned money, with an aim of getting better returns. While Shares refers to the share capital of the company.

The key difference between Shares vs Debentures is that Shares are the capital that is owned by the shareholders in the company that gives the right to vote in the matters of the company and the right to claim their share in the profits of the company, whereas, debentures are the debt instruments secured in nature issued by the company for raising funds having fixed rate of interest with cumulative and non-cumulative features redeemable after fixed interval either in installment or in lump sum. The corporate world has its own set of capital structure. They are having a highly complex capital format which includes share capital, debt fund, angel capital, reserves, and surplus, etc. Each component of capital structure has its own peculiarities which makes it suitable to its own set of situations and circumstances.

Shares vs Debentures

Didn't find the answer you were looking for? Ask a Question. Mehreen Misbah answered. There are many differences between shareholders and debenture-holders of a company, all of which are illustrated further. A shareholder is the proprietor of the company. On the other hand, a debenture holder is the creditor of the company. Moreover shareholders have the right to attend General Meetings that the company holds, a privilege that the debenture-holder does not have. This, in turn, gives the shareholders the right to vote in the General Meeting as well. Once again as the debenture-holders are not allowed to attend the General Meetings, the case of voting does not apply to them in the first place.

Difference between Shareholder and Debenture Holder

A shareholder or member is joint owner of the company; but a debenture-holder is only a creditor of the company. A shareholder has a voting right whereas a debenture-holder has no such right at the meeting of the company. Section of the companies act prohibits the issue of debentures carrying any kind of voting rights at general meeting of the company. Interest on debentures is payable whether there are profits or not.

Shareholders and debenture holders as the two terms relate refer to individuals holding shares and debentures respectively. Both the shareholders and debenture holders are different in several perspectives but the major difference is in their relationship with the company.

There are also preference shares that are different than common shares. There are several differences between a preference share and a debenture. The main difference is that a preference share is an equity share, like a shareholders share. But the preference share gives the owner preferential rights in the event of a dividend paying or a liquidation of the underlying company.

Shareholders Vs. Debentures Holders

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SEE VIDEO BY TOPIC: Difference between Shares and Debentures (P1) - Business Studies - Class 11 - Hindi - Magnet Brains

Preference shares—also referred to as preferred shares—are an equity instrument known for giving owners preferential rights in the event of a dividend payment or liquidation by the underlying company. A debenture is a debt security issued by a corporation or government entity that is not secured by an asset. Like common stock , preference shares represent ownership in a company. Unlike common stock, preference shares usually do not carry any voting power but give the holder of the preference shares claim on a specific quarterly dividend amount and precedence over common stock in the event of a company liquidation. Preference shares are an optimal alternative for risk-averse equity investors. They fall between common equity and corporate bonds on the risk spectrum.

What Is The Difference Between Shareholders And Debenture-holders?

I'm very much impressed with your blog details and wish further add-on to this knowledge by giving our own blog link describing the very details of the difference between shares and debentures. Get yourself acquainted with the fine knowledge on the topic and more. Monday, September 13, Distinguish between shareholder and debenture holders. Shareholder has interest in the company; debenture holder has interest against the company. Shareholder SH is a member of the company; debenture holder DH is a creditor of the company. Shares can't be issued at discount; debenture can be issued at discount.

Difference between Shares & Debenture, Distinguish between Shareholder & Debenture holder – sources of business finance – Secretarial Practice – Notes.

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What is the difference between shareholder and debenture-holder of a company?

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Differences between shareholders and debentures holders

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