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Difference between shareholder and debenture

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. A share is an indivisible unit of capital, thereby giving ownership to the shareholder and creating an ownership relationship between the company and the shareholder.

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SEE VIDEO BY TOPIC: Shares Vs Debentures: Difference between them with types

Shares vs Debentures

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.

A share is an indivisible unit of capital, thereby giving ownership to the shareholder and creating an ownership relationship between the company and the shareholder. Below is the top 13 difference between Shares vs Debentures. Both Shares vs Debentures is popular choices in the market. Both forms of capital have their own merits and demerits. Investors and stakeholders should do their research well and arrive not just in deciding their own risk appetite but also the financial capacity and growth of the business they want to invest in.

It is worth a study on how different type of companies and industries function to increase or reduce the ratio between these depending on their requirements.

This has a been a guide to the top difference between Shares vs Debentures. Here we also discuss the Shares vs Debentures key differences with infographics, and comparison table. You may also have a look at the following articles to learn more —. Forgot Password? Shares vs Debentures. Free Investment Banking Course.

By continuing above step, you agree to our Terms of Use and Privacy Policy. Login details for this Free course will be emailed to you. Please provide your Email ID. Email ID is incorrect. Debentures can be divided into 3 major heads: Secured vs Unsecured, Convertible vs non-convertible, Registered and bearer debentures.

Dividend needs to be paid to the shareholders only if profits are earned by the company. Interest needs to be paid to the debenture holders, even if there is no profit earned. On issuance of debentures to the public, trust deed must be executed between both the parties.

Equity shareholders have voting rights and the right to participate in the general meetings. In the case of dilution of the company, only preference shareholders are given preference and are repaid before anyone else.

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. But dividend on shares is to be paid only when the company has earned profits.

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.

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Differences between shareholders and debentures holders

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. It describes the right of the holder to the specified amount of the share capital of the company. Conversely, debenture implies a long term instrument showing the debt of the company towards the external party. It yields a definite rate of interest, issued by the company, may or may not be secured against assets, i. So, if you are going to invest in any of the two securities, you should first understand their meaning. In this article, we have provided the difference between shares and debentures in tabular form. The debentures are the borrowed funds of the company. What is it? Shares represent the capital of the company.

What Is The Difference Between Shareholders And Debenture-holders?

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.

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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. Shareholder is a joint-owner or proprietor of the company whereas debenture-holder is the creditor of the company.

Shareholders Vs. Debentures Holders

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.

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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.

Difference between shareholders and debenture-holders

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. A debenture is a debt security that is issued by a corporation or a government entity , and is not backed by an asset of a lien.

Define Shareholders and debenture holder. Explain in detail the difference between them.A shareholder is the joint owner of a company; but a debenture holder.

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Difference Between Shares and Debentures

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Difference between Shares and Debentures

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

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

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Comments: 2
  1. Teshicage

    Yes, really. So happens. Let's discuss this question.

  2. Grohn

    Anything.

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