Differences between Shares and Debentures

Basis

                                   Shares

                             Debentures

1.     Meaning

The shares are the owned funds of the company.

The debentures are the borrowed funds of the company.

2.     Nature

It represents the capita of the company.

It represents the debt of the company.

3.     Holder

The holder of shares is known as shareholders.

The holder of debentures is known as debenture holder.

4.     Status of Holders

Owners

Creditors

5.     Form of Return

Shareholders get dividend that is recommended by directors of the company. It is not a compulsory payment.

Debenture holders get the interest that is a compulsory payment.

6.     Security for Payment

There is no security for the payment of dividend.

There is a security that the interest must be paid.

7.     Voting rights

The holders of shares have voting rights.

The holders of debentures do not have any voting rights.

8.     Conversion

Share can never be converted into debentures.

Debentures can be converted into shares.

9.     Repayment in the event of winding up

Shares are repaid after the payment of all the liabilities.

Debentures get priority over shares and so they are repaid before shares.

10.  Maturity

Shares have no maturity date.

Debentures have maturity date on which principal value is redeemed.