Company Shares and Debentures

Monday, March 06, 2017


Shares
v  Share is a subdivision of the capital of the company
v  Each share has a distinct number
v  Each share is given a face value which is paid by the shareholder
v  There are two main types of shares

Difference between Preference Shares and Ordinary Shares
Preference Shares
Ordinary Shares
v  Dividend is paid first
v  At the time of winding up, share capital will be returned before that of  ordinary shares
v  It gets a fixed rate of dividend
v  It gives no voting right
v  Dividend is paid last
v  At the time of winding up, share capital will be returned after that of preference shares
v  No fixed rate of dividend
v  It gives voting right

Debentures
Debenture is a document which acknowledges a loan to the company. It is a part of the loan capital of the company. Debenture carries a fixed rate of interest which must be paid whether the company makes profit or not.

Difference between Shares and Debentures
Shares
Debentures
v  Shareholders are owners of the company
v  Ordinary shareholders get no fixed rate
v  Its reward is based on company profits
v  Ordinary shareholders have voting rights
v  Debenture holders are not the owners
v  It carries a fixed rate of interest
v  It is paid irrespective of profitability
v  Debenture holders have no voting right

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