What is the difference between shareholder and debenture-holder of a company?

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Shareholders and debenture holders as the two terms relate refer to individuals holding shares and debentures respectively. Both the shareholders and debenture holders are different in several perspectives but the major difference is in their relationship with the company. Shareholder is a joint-owner or proprietor of the company whereas debenture-holder is the creditor of the company. Some other significant differences are listed in the tabular form :

S.no Point of Difference Shareholders Debenture holders
1 Company management Board of directors representative of the shareholders control and regulate company affairs Not responsible for the management
2 Participation in Annual General Meeting or AGM /Right to vote
Shareholders being the joint-owners of the company are invited to attend AGM. Also they possess the right to vote
Not invited under ordinary circumstance

Annual Report

Receive annual reports copy including financial statements of the company
Not entitled to receive annual reports of the company
4 Interest income
Realize dividend income only when company makes profit
Interest is payable @ fixed rate irrespective of profit-earned or not. Often, from capital in case of the latter.

Equity/debenture conversion flexibility

 Shares held by the shareholders can't be converted into debentures Conversion of debenture to equity is possible
6 Issue of convertible debentures is possible
Issuance of shares that can be converted into debenture is not possible
Convertible debentures that can be converted into equity at the discretion of the holder can be issued
7 Impact of winding-up of the company

 Shareholders interest in the company is placed later to debenture holder.  Being secured creditors, debenture holders are paid- off first in the event of company liquidation


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