|
Answer» Distinction Between Shares and Debentures: | S.No. | Basis of Distinction | Share | Debenture | | 1. | Capital vs Loan | A share is the part of capital of the company therefore the shareholders are the owner of the company. | A debenture is a part of the loan and as such the debenture holders are the creditors of the company. | | 2. | Dividend vs Interest | A shareholder gets dividend from the company. | A debenture holder gets interest from the company. | | 3. | Fluctuating or fixed rate of dividend or interest | Dividend is paid only when there are profits. The rate of dividend may fluctuate from year to year depending upon the profits and decision of the directors. | The rate of interest is fixed and it must be paid irrespective of the company making a profit or incurring a loss. | | 4. | Voluntary or compulsory redemption | It is at the option of the company to return the amount of shares by buying back its own shares. | The amount of debentures must be returned according to the terms of the issue. | | 5. | Priority of repayment of principal in case of winding up | In case of winding up the payment of share capital is made after the repayment of debentures. | In case of winding up the payment of debentures is made before the payment of share capital. | | 6. | Unsecured or secured | A share is always unsecured. Hence they bear more risk. | Debentures are usually secured on the assets of the company. Hence they bear little risk. | | 7. | Restriction on issue at discount | Under Section 53 of the Companies Act, 2013, shares cannot be issued at discount except sweat equity shares. | There are no restrictions on the issue of debentures at discount. | | 8. | Voting rights | Shares confer son its holder the right to participate in and vote at company’s meetings. | A holder of debenture neither possesses any voting right in the company’s meeting nor can be participate in the meeting. |
|
