Features of Debentures


Basis

Debenture

Share

Nature

It is a part of the borrowed funds

It is the part of the owned capital

Status

Debenture holders are the creditors of the company

Shareholders are the owners of the Company.

Returns

A debenture holder gets interest even if there are losses.

A shareholder gets dividend out of profits and cannot be claimed by him till declared by the company.

Repayment

Debentures are redeemed on the due date. At the time of winding up debenture holders are repaid after the payment to the shareholders is made.

Amount of equity share capital is not returned during the lifetime of the company and at the time of winding up share capital is returned after all claims are met.

Charge

A charge fixed or floating is generally created on company's assets generally when debentures are issued.

No charge is created on assets of the company when it issues shares.

Voting Rights

Debenture holders do not enjoy any voting rights.

Share holders enjoy voting rights.

Convertibility

Debenture can be converted into equity shares.

Shares cannot be convertible.

Restriction on purchase by the company

There are no legal restriction on purchase of it own debentures.

There are legal restrictions on the purchase of its own shares.