Shares
Shares are part of a public corporation’s capital. When a firm goes public for the first time and is listed on stock exchanges, investors buy a share or a total number of shares in the company to raise money from the market.
It also means if you buy even a single share of a company, you become the owner of that small portion of a public corporation.
Types of Shares
Also known as “ordinary shares”, these shares are exchanged on the stock exchange and are non-redeemable. As a shareholder, you get voting rights within the firm and a share of the profits in the form of dividends.
Also known as “preferred stocks”, these are the shares where shareholders get dividends before the equity shareholders. It simply means, when it comes to sharing profit, preference shareholders have a privilege over the common shareholders. As a Preference shareholder, the dividend is fixed, but you don’t have voting rights.
In the case of bankruptcy, preference shareholders have the right to the company’s assets before ordinary shareholders.
Debentures
The word ‘Debenture’ derives from the Latin word ‘debere’ which means loan. When any company or government issues debentures to the public in the form of loans and promises to repay the borrowed amount with a fixed interest rate. Here we refer to the creditors as the debenture holders.
These debentures have fixed interest rates that can be payable at specific intervals like monthly, quarterly, half-yearly, or yearly.
Types of Debentures
- Registered Debenture and Bearer Debenture
Registered debentures are the ones where debenture holders’ details are kept by the company, including names, addresses, and other details as well.
Bearer Debentures are the ones that are transferrable and the company doesn’t record the details of bearable debenture holders.
- Convertible and non-convertible
Convertible debentures are ones that can be converted into equity shares after a specified period of time.
Non- convertible debentures are ones that can’t be transferred.
- First and Second Debenture
The first debentures are the ones that are repaid before the other debentures.
The second debentures are the ones that are repaid after the first debentures.
Difference between Shares and Debentures in a tabular chart:
| Basis |
Shares |
Debentures |
| Meaning |
Shares are part of a public corporation’s capital. |
Debentures are the borrowed capital of the company. |
| Holder |
A person holding shares is called a shareholder |
A person holding debentures is called a debenture holder |
| Status |
Owner |
Creditor |
| Interest |
Shareholders get the dividend |
Debenture holders get the interest |
| Voting rights |
They have voting right |
They don’t have voting right. |
| Transferable |
Shares can’t be transferred into debentures |
Debentures can be transferred into shares |
