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What are the Difference between Shares and Debentures

Updated on November 11, 2013

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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    • dilipchandra12 profile image

      Dilip Chandra 6 years ago from India

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

    • Cheeky Girl profile image

      Cassandra Mantis 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!

    • profile image

      rajat 6 years ago

      gr8 deal of info!!!!

    • profile image

      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.

    • profile image

      ravi verma 5 years ago

      tis is very nice information

    • profile image

      Dilip kumar sunkari 5 years ago

      its fantastic

    • profile image

      Shruti 5 years ago

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

    • profile image

      deepjyoti 5 years ago

      nice and a clear cut information...thanks

    • profile image

      ansh kashyap 5 years ago

      thanx for the very good analysis

    • profile image

      benny 5 years ago

      nice stuff worth reading!thanx a lot

    • profile image

      Sumukh 5 years ago

      Great info....awesome

    • profile image

      Cheluvaraj 5 years ago

      Its good to learn for correspondence students.

    • profile image

      neelu 5 years ago

      simply superb

    • profile image

      jamsheer 5 years ago

      Very thanks.its very useful hub

    • profile image

      haseeb 5 years ago

      superb

    • profile image

      AUSBILL 5 years ago

      VERY EDUCATIVE

    • profile image

      vedantsharma 5 years ago

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

    • profile image

      armaan 5 years ago

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

    • profile image

      Rituraj Gohain 5 years ago

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

    • profile image

      jyoti prasad hardhara 5 years ago

      i love you also know diferent between share and debenture

    • profile image

      Trecher 5 years ago

      great!! very informative

    • profile image

      jesycat 5 years ago

      MAGNIFICIENTO

    • profile image

      Vijay kumar Gupta 5 years ago

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

    • profile image

      yacquub eithiopia 5 years ago

      Bravo ... Great article and great impressive writing

    • profile image

      Tsering Choemphel 5 years ago

      excellent and informative..Enjoying going through!

    • profile image

      Violet 5 years ago

      Splendid!! So informative

    • profile image

      Vince usa 5 years ago

      Splendid

    • profile image

      merlco kabowa 5 years ago

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

    • profile image

      Egejuru callistus 5 years ago

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

    • profile image

      akhan 4 years ago

      simply superb , both clarity and brevity

    • profile image

      Uba chinyere 4 years ago

      Is good to studies always because it's help

    • profile image

      princy jain 4 years ago

      very informative and good article

    • profile image

      tina; Ghana 4 years ago

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

    • profile image

      njogu karugia 3 years ago

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

    • profile image

      aliya 2 years ago

      Superb explanation it is really very helpful thanks a lot

    • profile image

      aqsa 20 months ago

      Osammmmm

    • profile image

      Abdulaziz 16 months ago

      Hub page an good pages for searching ideas words of un understanding e.t.c

    • profile image

      Abdul Aziz Ahmad imam 16 months ago

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

    • profile image

      Abdul Aziz Ahmad imam 16 months ago

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