Debentures are debt security issued by companies, having a
certain MATURITY and bearing a stated COUPON RATE.
Debentures may be unsecured or secured by ASSETS such as
land and building of the issuing company. Debenture holders
have a prior claim on the earnings (coupon) and ASSETS in
the event of liquidation, as compared to PREFERENCE and
preference shares represent partial ownership in a company,
although preferred stock shareholders do not enjoy any of
the voting rights of common stockholders.The main benefit
to owning preference shares are that the investor has a
greater claim on the company's assets than common
stockholders Preferred shareholders always receive their
dividends first and, in the event the company goes bankrupt.
Preference share is a hybrid form of equity shares &
Debentuer is a borrowed capital,but preference is owned
Interest on debenture paid before tax payment & dividend on
prefrence share paid after payment of tax.
Debenture hloder doesnot have the right to vote, whereas in
special case prefrence shareholder have right to vote
Debentuer carry less risk & give regular certain income but
prefrence share is risky as compared to debenture & didn't
give certanity of income
debenture is the most common form of loan capital in which
is made available by investors on a long term basis. it is
a document containing details of an interest bearing loan
made to a company.
Preference shares are shares dividned, it has especal
pirority incase of winding up company. these type of shares
are based on fixed time in the year. profits are shared to
Preference share holders before Equity share holders.
the debentures can get the interest in all the
but the preference shares can get interest based upon the types
like if the preference share is cumulative on means the
interest is added with next year interest(at that time of
loss only)like wise the preference share differ from debentures.