WHAT IS DIFFERENCE BETWEEN SHARE AND DEBENTURE ?
The difference between Shares and Debentures is given below-
Basis of Difference | Shares | Debentures |
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1. Owner or Creditor | Share holders are the owners since shares forms a are part of owned capital | Debenture holder are Creditors since debentures are a part of loan |
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2. Voting Rights | Share holders have the voting rights | Debenture holders do not have any voting rights. |
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3. Returns | Share holders are entitled for returns in the form of dividend. | Debenture holders are entitled for returns in the form of interest. |
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4. Rate of Return | The rate of dividend is not fixed and varies from year to year. | The rate of interest is fixed and do not vary from year to year. |
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5. Obligations of Return | Dividend is appropriation of profit. Dividend will not be paid if losses are incurred by the company | Interest is charged against profit, interest is payable even if there is no profit.
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6. Repayment of Amount | The amount of share is not returned during the life time of the company | The amount of debenture is returned according to the term of issue. |
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7. Issue | The issue of shares at discount need adherence to the restrictions imposed by the Section 79 of the Company Act. | There are no such restrictions for issuing debentures a on discount. |
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8. Conversion | Shares cannot be converted into debentures. | Debentures can be converted into shares. |
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9. Risk | Shares are more risky than debenture as these are unsecured. | If debentures are secured against asset, the risk involved is the minimal. |
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10. Repayment Priority | Payment to the share holders is made after settlement of all external liabilities, i.e. after debenture holders. | Payment to the debenture holders is made before the share holders. |