RACHITA

BBA LLB(H)
ASSIGNMENT-Differences between shares and debentures

Basis of Difference SHARES DEBENTURES

1. Capital A share is a part of equity or A debenture is a part of loan capital of the
preference share capital of a company. company. The holder of a debenture is the
The holders of the shares may be creditor of the company.
described as part owner of the
company.
2. Return Return on share is known as dividend. Return on a debenture is known as interest
A company declares dividend only and the company compulsorily pays it at a
when there are profits and its rate may fixed rate whether there are profits or
vary from year to year. losses.
3. Appropriation Dividend is an appropriation of profit Interest on debenture is a charge against
and is therefore debited in Profit & profits and is therefore debited in Profit &
Loss Appropriation Account. Loss Account.
4. Charge on Shares do not create any charge on the Debentures create a charge on the asset of
Property assets of the company. the company.
5. Redemption Normally the share capital is not The amount of debentures has to be
returned during the lifetime of the returned after a stipulated period of time
company. as per the conditions of issue.
6. Discount on Shares can be issued at discount only There are no restrictions on issue of
Issue when the conditions lay down in debentures at a discount.
Section 79 of the Companies Act 1956
are fulfilled.
7. Premium on The premium received on issue of Premium received on issue of debentures
Issue shares can be utilised by the company can be utilised by company in any manner
subject to the conditions given in it likes.
Section 78 of the Companies Act
1956.
8. Purchase A company cannot purchase its own A company can purchase own debentures
shares from the open market.
9. Convertibility Shares cannot be converted into Debentures can be converted into shares
debentures. according to the conditions of issue of
debentures.
10. Control A shareholder has the right to control A debenture holder does not have any
 the affairs of the company by right to control the affairs of the company.
exercising his right to attend the
general meeting of the company and
by exercising his voting right.
11. Winding up At the time of winding up the Debenture holders have a priority as to
shareholders are paid their capital at return of amount received from them in
the end. the event of winding up of the compa