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Shareholders Vs.

Debentures Holders

Gazu Lakhotia
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Shareholders vs. Debentures holders Meaning- The subscribed to the shares are shareholders. Shares
are the parts of share capital. On the other hand, Debenture-holders are the subscribers to debentures.
Debentures are part of loan.
Shareholders vs. Debentures holders
1. Meaning- The subscribed to the shares are shareholders. Shares are the parts of share capital.
On the other hand, Debenture-holders are the subscribers to debentures. Debentures are part of
loan.
1. Status- Shareholders are the owners of the company whereas Debenture-holders are the
creditors of the company.
2. Return- Shareholders are paid dividend on their holdings. Debenture-holders are paid interest on
debentures held by them.
3. Regularity of return- Dividends are paid to the shareholders, when there is sufficient profits. The
rate of dividend is not fixed. Dividends are not the regular source of income. Whereas, Interest on
debentures is paid at fixed rate regularly.
4. Security- Shares are not secured. Debentures are normally secured.
5. 6. Right to attend meeting- Shareholders are invited to attend the annual general meeting of
the company. Debenture-holders are not invited, unless any decision affecting their interest is
taken.
6. Repayment- Share capital is not returned except in case of redeemable preference shares.
Debentures being loan is repaid by the company.
7. Priority of refund- In case of termination of the corporation, shareholders funds are refunded
after every claim is settled. Debenture-holders have a priority of the refund of their loan prior to
shareholders.
8. Restriction on issue- There are certain restriction on issue of shares at discount. There is no
restriction as to issue of debentures at discount.
10. Control- Shareholders control the affairs of the company. It is managed by the Board of Directors,
the elected representatives of the shareholders. Debenture-holders are not concerned with the
management and regulation of the company.
Difference between Shares (Equity) and Debentures
1. Meaning- Shares are the denominations of share capital. Debentures are the denomination of
loan.
2. Return- Dividend is received on shares. Interest is received on debentures.
3. Assured return- Rate of dividend on equity shares is not assured. Rate of interest on debentures
is assured.
4. Security- Shares are not secured. Debentures are ordinarily secured.
5. Repayment- The money received on equity shares is not required to be returned except in
dissolution.
6. Status- The holders of equity shares are the owners of the company. The holders of debentures
are the creditors of the company.