What are the Difference between Shares and Debentures

Difference between Shares and Debentures

Shares are uniform parts of the share capital. Debentures are uniform part of the loan capital of a company.  Rights, privileges and the liabilities accompanying these instruments are different from one another.  The main differences are as follows:

  1. Share holders are owners of the company whereas the debenture holders are creditors of the company.  Therefore, while the shareholders have a multi-faceted interest in the welfare of the company.  The debenture holders  have a very limited interest in the company. i.e. limited to receiving interest on time.
  2. A shareholder is entitled to receive dividend when there are profits.  The rate of dividend varies from year to year depending upon the amount of profit.  On the other hand, the debenture holders are entitled to interest at a fixed rate which the company must pay whether or not there are profits.
  3. A shareholder enjoys the rights of proprietorship of a company whereas a debenture holder can enjoy the rights of a lender only.
  4. A shareholder has a right of control over the working of the company by attending and voting in the general meeting.  They are able to decisively influence the composition of Board of directors and other senior management positions.  The debenture holders do not have any voting right, and they are unable to exercise any such influence.
  5. A debenture holder gets a fixed rate of interest per annum payable on fixed dates whereas a shareholder gets a dividend far higher if the company earns good profits.
  6. Dividend on shares is not a charge against profit.  Interest on debentures, on the other hand, is a charge against profits and is deducted from profits for the purpose of calculating tax liability.
  7. In respect of shares, dividend is payable only when the proposal to pay dividend is passed by the shareholders at the annual general meeting of the company.  There is no need of such approval in the case of payment of interest on debentures.
  8. A company can purchase its own shares from the market under certain condition whereas it can purchase its own debentures and cancel them or re issue them.
  9. A shareholder has a claim on the accumulated profits of the company and is normally rewarded with bonus shares whereas a debenture holder has no such claims whatsoever after he has been paid the interest amount.
  10. Shareholders cannot be paid back (Except in case of redeemable preference shares) so long as the company is going concern.  Debentures are normally issued for a specified period after which they are repaid.
  11. In the event of winding up, shareholders cannot claim payment unless all outside creditors have been paid in full.  Debenture holders being secured creditors get priority in payment over the shareholders.

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Comments 40 comments

dilipchandra12 profile image

dilipchandra12 6 years ago from India

very informative. good hub on shares and debentures... awesome


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Cheeky Girl 6 years ago from UK and Nerujenia

Wow, a great hub and very informative. You are a mine of information here. Expertly written! Rating this up!


rajat 5 years ago

gr8 deal of info!!!!


shery; Nairobi Kenya 5 years ago

that is great input. Thanks a lot for keeping the world informed.


saif113sb profile image

saif113sb 5 years ago

very nice and informative hub.


ravi verma 5 years ago

tis is very nice information


Dilip kumar sunkari 5 years ago

its fantastic


Shruti 5 years ago

Very helpful..........thanks


deepjyoti 5 years ago

nice and a clear cut information...thanks


ansh kashyap 5 years ago

thanx for the very good analysis


benny 5 years ago

nice stuff worth reading!thanx a lot


Sumukh 5 years ago

Great info....awesome


Cheluvaraj 5 years ago

Its good to learn for correspondence students.


neelu 5 years ago

simply superb


jamsheer 5 years ago

Very thanks.its very useful hub


haseeb 4 years ago

superb


AUSBILL 4 years ago

VERY EDUCATIVE


vedantsharma 4 years ago

Brilliant...Easy to Understand...Thank You very much


armaan 4 years ago

good to study with the help dis . . . . . . THANK YOU.


Rituraj Gohain 4 years ago

Is it the same ans for shares vs debenture, not for the differnce between shareholders vs debenture holders.


jyoti prasad hardhara 4 years ago

i love you also know diferent between share and debenture


Trecher 4 years ago

great!! very informative


jesycat 4 years ago

MAGNIFICIENTO


Vijay kumar Gupta 4 years ago

it is the excellent to know about the relationship between the share and debentures etc. thanks


yacquub eithiopia 4 years ago

Bravo ... Great article and great impressive writing


Tsering Choemphel 4 years ago

excellent and informative..Enjoying going through!


Violet 4 years ago

Splendid!! So informative


Vince usa 4 years ago

Splendid


merlco kabowa 4 years ago

very educating..... i lyk it!!


Egejuru callistus 4 years ago

I love that written so much. Thank. More affort to you work.


akhan 4 years ago

simply superb , both clarity and brevity


Uba chinyere 4 years ago

Is good to studies always because it's help


princy jain 4 years ago

very informative and good article


tina; Ghana 4 years ago

wow.......... this is educative..........thanks a lot


njogu karugia 3 years ago

nice and super b info made me get a distinction kudos!


aliya 2 years ago

Superb explanation it is really very helpful thanks a lot


aqsa 17 months ago

Osammmmm


Abdulaziz 13 months ago

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Abdul Aziz Ahmad imam 13 months ago

Hup page is good in getting good answers good definitions and it give good explanations e.t.c


Abdul Aziz Ahmad imam 13 months ago

Hup page is good in getting good answers good definitions and it give good explanations e.t.c

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