Your question: Are debentures and shares the same?

Share is the capital of the company, but Debenture is the debt of the company. The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtedness of the company. The income earned on shares is the dividend, but the income earned on debentures is interest.

Which is Better shares or debentures?

Here, the fund is a borrowed capital, which makes the holder of debenture a creditor of the business. The debentures are both redeemable and unredeemable, freely transferable with a fixed interest rate.

SharesDebenturesShares are the company-owned capital.Debentures are the borrowed capital of the company.HolderЕщё 14 строк

What is difference between share and debenture?

One difference between share and debentures is that debentures become borrowed capital for the company. It is like a loan that a company has taken from the debenture holders which is supposed to pay back with interest in due time. … However, unlike shareholders, debenture holders do not get voting rights.

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Can shares be converted into debentures?

Convertible debentures are converted into equity shares on maturity. The conversion date and rate of conversion is stated in the prospectus. The company does not redeem convertible debentures. Convertible debentures can be classified into fully convertible and partly convertible debentures.

What is the difference between debenture holders and shareholders?

A person having the debentures is called debenture holder whereas a person holding the shares is called shareholder. A shareholder subscribes to the shares of a company. … Debentures are part of loan. A shareholder or member is the joint owner of a company; but a debenture holder is only a creditor of the company.

Why equity shares are better than debentures?

Equity shares capital is not to be returned back except in the case of liquidation. The amount of debentures is paid back to debenture-holders after a fixed time. Shareholders have a right to participate in the affairs of the company.

What are the benefits of debentures?

The following are the advantages of debentures:

  • Secured investments. Debentures provide greatest security to the investors. …
  • Fixed return. Debentures guarantee a fixed rate of interest.
  • Stable prices. …
  • Non-interference in management. …
  • Economical. …
  • Availability of funds. …
  • Regular source of income.

What is a debenture in simple terms?

A debenture is a type of bond or other debt instrument that is unsecured by collateral. Since debentures have no collateral backing, debentures must rely on the creditworthiness and reputation of the issuer for support. Both corporations and governments frequently issue debentures to raise capital or funds.

Who is called debenture holder?

Definition of a debenture

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A debenture is a way that larger, public limited companies might borrow money at a fixed rate of interest. The company borrows money from the lender, who’s then called a “debenture holder”. … Unlike shareholders, debenture holders can’t vote at companies’ general meetings.

What is Debenture with example?

The definition of a debenture is a long-term bond issued by a company, or an unsecured loan that a company issues without a pledge of assets. … An interest-bearing bond issued by a power company is an example of a debenture.

Are debentures high risk?

The majority of debentures and unsecured notes have a fixed rate of interest and a fixed repayment of capital amount. … The main risk that fixed-rate debentures and unsecured notes holders are exposed to is the opportunity cost that a better rate of return may be available elsewhere if interest rates were to increase.

When can debentures be issued?

Section 71: – A Company may issue debentures with an option to convert into shares, wholly or partly, at the time of redemption but cannot issue debentures with voting rights. 1. Debentures cannot be issued with voting rights. 2.

What is type of debenture?

Debentures are a debt instrument used by companies and government to issue the loan. The loan is issued to corporates based on their reputation at a fixed rate of interest. … Secured and Unsecured, Registered and Bearer, Convertible and Non-Convertible, First and Second are four types of Debentures.

Which of the following best describes the key difference between a shareholder and debenture holder?

Key Differences Between Shares and Debentures

Share is the capital of the company, but Debenture is the debt of the company. The shares represent ownership of the shareholders in the company. … There is no security charge created for payment of shares. Conversely, security charge is created for the payment of debentures.

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How many types of preference shares are there?


What are the rights of debenture holders?

(i) They can file a suit against the company for the principal as well as for the interest. (ii) They can file an application to the court regarding compulsory dissolution of the company. (iii) If the company is under the process of winding up, they can claim their principal.