Difference between a share and a debenture (Class 12)

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Looking for the difference between a share and a debenture as per the syllabus of class 12 CBSE, ISC, and state Board.

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Distinction between share and Debenture (Class 12)

Following are the basic difference between both.

BasisShareDebenture
Capital vs LoanA share is the part of the capital of the company, thus, shareholders are the owners of the companyA debenture is a part of the loan and as such, the debenture holders are the creditors of the company.
Dividend vs InterestA shareholder gets a dividend from the company.A debenture holder gets interest from the company
Fluctuating or fixed rate of dividend or interestThe dividend is paid only when there are profits. The rate of dividend may fluctuate year to year as per the profits and decisions of the directors.The rate of interest is fixed and it must be paid irrespective of the company making a profit or incurring a loss.
Voluntary or compulsory redemptionIt is at the option of the company to return the amount of shares by buying back its own shares.The amount of debentures must be returned according to the terms of the issue.
Priority of repayment of principal in case of winding upIn the case of winding up, the payment of share capital is made after the repayment of debentures.In the case of winding up, the payment of debentures is made before the payment of share capital.
Unsecured or SecuredA share is always unsecured. Hence, they bear more risk.Debentures are usually secured on the assets of the company. Hence, they bear little risk.
Restriction on issue of discountUnder Section 53 of the companies Act 2013, shares can not be issued at discount except sweat equity shares.There are no restrictions on the issue of debentures at discount.
Voting RightsShare confers on its holder the right to participate in and vote at company’s meetings.A holder of debenture neither possesses any voting right in the company’s meetings nor can participate in the meeting
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