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Distinguish Between Shares and Debentures - Secretarial Practice

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Distinguish between Shares and Debentures

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1 Meaning A Companies owned capital which is spilt into large number of equal parts each such part is called as shares

Debenture is an acknowledgement of debt. It is a source of borrowed capital.

2 Return on investment Monetary return on shares is called as dividend and it is paid at fluctuating rate. Monetary return on debentures is called as interest and it is paid at a fixed rate.
3 Voting rights

The Shareholders have voting rights through which they can participate in the management.

The Debenture holders do not enjoy normal voting rights, except on those matters which affect their interest
4 Status of holders The shareholders are the owners of the company. Debenture holders are the Creditors of the company.
5 Redemption Equity shares are not redeemed throughout 7 the life of the company. Redeemable debentures are paid back after its maturity.
6 Priority claims Shareholders do not have any priority while receiving return on investment or return of capital. Debenture holders have prior claims for repayment of capital and for receiving interest on their investments.
7 Market Value Market values of the shares keep changing as per the financial condition of the company. Market value of the debentures remains constant.
8 Security offered No security is offered for investing money in share capital. Company can offer any asset as a security to debenture holders.
Concept: Company Secretary - Conversion of Debentures into Shares
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