Equity Shares and Debentures Differentiated

Debentures and shares are similar in some respects because both can be sold or bought at the stock exchange market. The two can be used as collateral for short-term loans once their market value is established. Despite these similarities, there are other factors that make them different. These factors are as follows:

  1. A person who holds a debenture is a creditor to the company whereas a shareholder is the owner of the company.
  2. Notwithstanding whether a company makes profits or losses, a debenture holder must get interests However, a shareholder only gets dividends only when a company makes profits.
  3. Shareholders have a right to hold meetings and vote, whereas debenture holders do not have this right.
  4. Debenture holders have a charge on the company’s assets unlike shareholders who do not have a charge over the assets of a company.
  5. The type of income payable to debenture holders is interests while the type of income payable to shareholders is dividends.
  6. In winding up of a company, debenture holders are paid first, before holders of preference shares and equity shares.







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