A person having the debentures is called debenture holder whereas a person holding the shares is called shareholder. A shareholder subscribes to the shares of a company. Debentures are part of loan. A shareholder or member is the joint owner of a company; but a debenture holder is only a creditor of the company.
What are the rights of debenture holders?
Rights as a Debenture Holder
- To receive interest / redemption in due time.
- To receive a copy of the trust deed on request.
- To apply for winding up of the company if the company fails to pay its debt.
- To approach the Debenture Trustee with your grievance, if any.
Who is the debenture holder of a company?
Debenture-holders are the subscribers to debentures. Debentures are part of loan, so a debenture holder is only a creditor of the company.
Why equity shares are better than debentures?
Equity shares capital is not to be returned back except in the case of liquidation. The amount of debentures is paid back to debenture-holders after a fixed time. Equity shares get the refund only when all liabilities have been paid off. Debenture holders get payment in priority as compared to all the creditors.
What does a debenture holder earns?
Explanation. A debenture pays a regular interest rate or coupon rate return to investors. Payment of interest is made to the debenture holder at a specified rate and at clearly defined intervals.
What are the differences between shareholders and debenture holders?
1 A shareholder or member is joint owner of the company; but a debenture-holder is only a creditor of the company. 2 A shareholder has a voting right whereas a debenture-holder has no such right at the meeting of the company. 3 Interest on debentures is payable whether there are profits or not.
What is the difference between secured and unsecured debentures?
1. Secured and Unsecured: Secured debenture creates a charge on the assets of the company, thereby mortgaging the assets of the company. Unsecured debenture does not carry any charge or security on the assets of the company. 2. Registered and Bearer: A registered debenture is recorded in the register of debenture holders of the company.
Can a debenture holder be paid out of capital?
Shareholders cannot be paid out of capital, except for preference shareholders but they would be second in line for repayment, whilst debenture holders interest and principle could be paid out of the company’s capital. 5. Debentures are secured and thus carry a fixed or floating charges on the company’s assets.
Can a bearer debenture be converted into a share?
Bearer debentures – the company does not hold the record of debenture holder. They are transferable by delivery. Non-convertible debentures – These debentures cannot be converted into shares or any equity. They are mandated to remain debentures till the redemption of loan.
