— Kishore V, SME and ACW at Edumarz
- Interest is paid on the main amount of the debenture, just like it is on the owner’s capital.
- The interest paid is considered a business cost and is deductible under the Income Tax Act.
- Because debentures are redeemable over a lengthy period of time, they are also known as loan capital.
Shares | Debentures |
What does it mean? | |
The company’s capital is represented through shares. | Debentures are the company’s borrowed funds. |
Holder | |
Shareholders are individuals who possess shares in a company. | The person who owns the Debentures is known as the Debenture Holder. |
Status | |
Owners. | Creditors |
Mode or return | |
Dividends are paid to shareholders. | Debenture holders, on the other hand, get interest. |
Payment of return | |
Profits made by the firm can be used to pay dividends to shareholders. | Regardless of whether the firm makes a profit, interest can be paid to debenture holders. |
Voting rights | |
Shareholders have the ability to vote. | Debenture holders do not have the ability to vote. |
Conversion | |
Debentures cannot be converted from shares. | Debentures, on the other hand, maybe simply changed into shares. |
Trust Deed | |
In the shares, there is no trust deed. | A trust deed must be executed before the debentures are distributed to the public. |