Shares

  1. Shareholders are the owners of the company. They provide ownership capital which is not refundable unless the company is liquidated.

  2. Shareholders get dividends. Its amount is not fixed as it depends on the profit of the company.

  3. Shareholders are the real owners of the company. They have the right to vote and determine the policies of the company.

  4. No security is required to issue shares.

  5. Share capital is paid back only after paying the debenture holders and creditors.

  6. Risk is high due to uncertainty of returns.

Debentures

  1. Debenture holders are the creditors of the company. They provide loans generally for a fixed period, which are to be paid back.

  2. Interest is paid on debentures at a fixed rate. Interest is payable even if the company is running at a loss.

  3. Debenture holders do not have the right to attend meetings of the company. So they have no say in the management of the company.

  4. Generally debentures are secured. So, sufficient fixed assets are required when debentures are to be issued.

  5. Debenture holders have the priority of repayment over shareholders.

  6. Little risk due to certainty of return.