Question
Explain The Difference between share and Debenture.
No. | Points | Share | Debenture |
1 | Meaning | A joint stock company divides its capital in small parts. Each part is called a share. | When a joint stock company borrows money from public is called debenture. |
2 | Capital | It is Owner’s capital. | It is borrowed funds. |
3 | Return | The company pays divident on a share from profit. | Company pays interest on the debenture amount. |
4 | Rate of Return | The rate of dividend is unspecified. | The rate of interest is specified. It is payable whether there is any profit or not. |
5 | Ownership | Shareholders are the owners of the company. | Debenture holders are the creditors of a company. |
6 | Risk | The risk is higher in shares. Shareholders have voting rights. | The risk is less in debentures. Debenture holders have no voting rights. |
7 | Right of vote | The risk is higher in shares. Shareholders have voting rights. | The risk is less in debentures. Debenture holders have no voting rights. |
8 | Stamp duty | The stamp duty on transfer of shares is payable at lesser rate. | The stamp duty on transfer of debenture is payable on a higher rate. |
9 | Redemption | The shareholders can not get their money back as long as the . company is in existence. At the time of liquidation, they get their money at the end. | The debenture can be redeemed as per its type. They have the first right to receive their money in case of liquidation. |
10 | Charge on Assets | There are no changes on assets. | Issue of debenture creates changes on assets of the Company. |
11 | Payment out of Capital | Dividend on Shares can not be paid out of capital of the company. | Interest on debentures can be paid out of capital as per the provisions. |
12 | Control | Share holders have control over the administration of the company. | Debenture holders have no control over the administration of the company. However they can appoint debenture trustees to safeguard their interest. |
13 | Demand for Liquidation | Shareholders can not demand a liquidation of the company. | Debenture holders can demand a. liquidation of the company. |
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