Shares and Debentures : A Comparison Chart
BASIS FOR
SHARES
COMPARISON
Meaning The shares are the owned
funds of the company.
What does it represent? Shares represent the capital of
the company.
Holder The holder of shares is known
as shareholder.
Status of Holders Owners
Nature of Return Dividend.
Payment of return Dividend can be paid to
shareholders only out of
profits.
Allowable deduction Dividend is an appropriation
of profit and so it is not
allowed as deduction.
Security for payment Payment of dividend depends
on the decision of the Board
Voting Rights Present
Conversion Shares can never be converted Debentures can be converted
into debentures.
Repayment in the event Shares are repaid after the
of winding up payment of all the liabilities. shares, and so they are repaid
Quantum Dividend on shares is an
appropriation of profit.
Trust Deed No trust deed is executed in
case of shares.
DEBENTURES
The debentures are the borrowed
funds of the company.
Debentures represent the debt of
the company.
The holder of debentures is
known as debenture holder.
Creditors
Interest.
Interest can be paid to debenture
holders even if there is no profit.
Interest is a business expense
and so it is allowed as deduction
from profit.
Whether the company gets profit
or loss, it has to pay Interest on
debentures as agreed.
Absent
into shares.
Debentures get priority over
before shares.
Interest on debentures is a
charge against profit.
When the debentures are issued
to the public, trust deed must be
executed.
 Equity and Preference shares : A Comparison Chart

BASIS FOR
EQUITY SHARES PREFERENCE SHARES
COMPARISON
Meaning Equity shares are the Preference shares are the shares that
ordinary shares of the carry preferential rights on the
company representing the matters of payment of dividend and
part ownership of the repayment of capital.
shareholder in the
company.
Payment of dividend The dividend is paid after Priority in payment of dividend over
the payment of all equity shareholders.
liabilities.
Repayment of capital In the event of winding up In the event of winding up of the
of the company, equity company, preference shares are
shares are repaid at the repaid before equity shares.
end.
Rate of dividend Fluctuating Fixed
Redemption No Yes
Voting rights Equity shares carry voting Normally, preference shares do not
rights. carry voting rights. However, in
special circumstances, they get voting
rights.
Convertibility Equity shares can never be Preference shares can be converted
converted. into equity shares.
Arrears of Dividend Equity shareholders have Preference shareholders generally get
no rights to get arrears of the arrears of dividend along with the
the dividend for the present year's dividend, if not paid in
previous years. the last previous year, except in the
case of non-cumulative preference
shares.