Different types of shares and debentures pdf file

Let us discuss about different types of investment options for small investors and entrepreneurs. Debentures are different from stocks and bonds, although all three are types of investment. Thus, opening up of the capital market in the 1990s brought a large section of investors into the nim and triggered an equity boom. Convertible debentures which can be converted into shares at the option of debenture holder can be issued whereas shares convertible into debentures cannot be issued. No default in filing accounts and annual return in 5 immediate last fys. Issue and redemption of debentures types of debentures. Unlike shareholders, the debenture holders who are the creditor of the company do not hold any voting rights. Debentures can be issued to vendors at par, at premium and at discount. Nature of shares a share is the interest of a member in a company. Difference between shares and debentures last updated on november 19, 2018 by surbhi s nowadays, investment in shares and debentures has taken a dominant position in the society, as people of different ages, religion, sex, and race invest their hard earned money, with. Let us learn more about the various methods of redemption of debentures and their accounting treatments. Explain various types of debentures issued by companies. Shares may be one of the simplest financial products in which to invest but there are different types of shares traded on asx with different characteristics.

Types of shares and debentures free download as pdf file. Total shares capital of a company is divided into a number of small invisible units of a fixed amount called a share. In fpo or ipo, they generally sell their shares and debentures to the investors. Types of debentures classified on the basis of security, convertibility, records, repayment and priority. Preference share is a hybrid security having features of both equity and debt. The certificate of incorporation of a company is issued by registrar of.

With household savings having a high share in total savings, this boosted the growth of nim in the 1990s, both indirectly and directly. So when it comes time for a company to elect a board of directors or vote on any form of corporate policy. Following are the various types of debentures visavis their basis of classification. The company doesnt require to pay it back until it is liquidated. Accounting for share capit al share and share capital. The company decided to redeem all its preference shares at par on 1 april 2006. Shares may be further subdivided into different types, as follows. The different classes of share capital and the rights attached to these classes are different. These securities are repayable after a fixedperiod. The preference shares are market instrument issued by the companies to raise the capital.

Apr 21, 2016 there are different types of shares, and you must be well familiar with all of them. Mar 12, 2020 preference shares and debentures are two different types of financial instruments. If a company goes bankrupt, different security holders will be paid with different priority. Although the money raised by the debentures becomes a part of the companys capital structure, it does not become share capital. May 05, 2015 convertibility in debentures denotes conversion of a debenture to equity shares. Debentures meaning, issue, features, types, advantages. But before moving towards the types of debentures, lets see what is debenture.

A debenture is an instrument of acknowledgement of debt under the common seal of a company. For raising a capital company uses various sources of funds like share capital by issuing shares to public, debt capital by issuing debentures, term loans from banks, etc. When a company purchases some assets and issues debentures as a payment for the purchase, to the vendors it is known as issue of debentures for consideration other than cash. Ordinary shareholders own a piece of the company and have certain rights. A debenture may, be defined as document issued by the company as an evidence of debt. Define shares explain the different types of shares in detail. It is only one of the methods of raising the loan capital of the company. This process of discharging the companys debt is known as the redemption of debentures. Companies can be classified into three types based on the liability of the members.

Fixed value of a share, printed on the share certificate, is called nominal valuepar valueface value. What is the difference between shares, bonds, and debentures. A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. Difference between shares and debentures with similarities and. These are mediumlong term debt or loans taken by a company to raise capital. Mar 17, 2020 thanks for a2a, shares or equity shares are the capital raised by an entity by selling a part of its ownership. The debentures are classified on the basis of security, as secured and unsecured. The liability of the shareholders is limited to the extent of the face value of shares held by them. Preference share has the qualities of both equity shares and debentures. A company may increase part of its capital by obtaining loans. This chapter deals with the accounting for share capital of companies. Unlike public limited companies, here the transfer of shares is limited to its members and the general public cannot subscribe to its shares and debentures. Conversely, debenture implies a long term instrument showing the debt of the company towards the external party.

Debentures are a medium to a long term investment that allows companies to raise finance by borrowing money from citizens. It all depends on how the company is registered as. Types of debentures the following are the important types of the debentures of the joint stock. Bond is also an instrument of acknowledgement of debt. Share, debentures or other interest of any member in a company. Terms of the repayment of the principal sum and payment of interest are. Meaning and its types of debenture your article library. You may define shares as a smaller part of capital that is known as share and a person, who owes shares is known as the shareholder. Difference between shares and debentures meaning, definition. Types of debentures basis redemption, convertibility.

Essential requirements and different types of companies subpart b method of incorporation 22. Debentures pay the holders a fixed rate of interest this interest rate is usually lowe. Feb 25, 2020 a main difference from common stock is that preferred stock comes with no voting rights. The most popular type of share is called a common or ordinary share. Shares or stock refer to owning a stake in a company or a fund. No default in payment of dividend, debentures, deposit, preference shares, loan from bankfis, statutory dues of. This is common when an investor purchases the debt of a new company and isnt sure if they will want shares at the time the debenture matures. Every business requires capital for starting a business. Difference between share and debenture share vs debenture. There are different types of shares, and you must be well familiar with all of them. The returns on the equity shares are not at all fixed. It yields a definite rate of interest, issued by the. Second debentures these debentures are redeemed after the redemption of first debentures. Equity share capital section 43 of the act provides that the share capital of a company limited by shares shall be of two kinds.

A debenture is a type of debt instrument that is not secured by physical assets or collateral. Types of shares their merits and demerits cl xi bussiness studies by. The investment of debentures does not imply a property right, only an obligation for issuer to pay interest and whole lending in defined periods. A part of these instruments are converted into equity shares in the future at notice of.

Preference sharesalso referred to as preferred sharesare an equity instrument known for giving owners. A part of these instruments are converted into equity shares in the future at notice of the issuer. Read this article to learn about the meaning and types of debentures. Apr 24, 2016 there are different types of debentures, which probably used now days for raising finance. Dividend on preference share is payable out of profits after paying interest on debt but before paying dividend on equity shares. Section 44 of the companies act, 20, states that shares or debentures or other interests of any member in a company are movable properties. Shares can be broadly divided into two categories equity and preference sh. In fact, different share classes can have identical rights to other classes. There are different types of debentures, which probably used now days for raising finance. Different types of shares and debentures bizencyclopedia. Different types of shares what is an ordinary share. Some simply give the investor the option to turn the debt into equity at some point. Convertible debentures usually have a lower interest rate compared to.

The company is legally bound to repay the principal amount to the debenture holders on. In any company there may be more than one class of debentures each of which may have different rights as to security, transferability, repayment etc. Discuss different kinds of debentures within the environment and management of financial services forums, part of the upload download banking and insurance projects and notes category. These both are two different types of investment that a person can make or a company can issue in order to raise capital. In order to compensate the investors, such debentures are issued at substantial discount and the difference between the nominal value and the issue price is treated as the amount of interest. Importantabout specimen presentation of debenture certificate for different kinds of debentures pdf is not asked yet. Preference shares are shares which carry the right to. There are different types of shares such as equity shares, preference shares, bonus shares, right shares, and employees stock option plan shares.

Nov 19, 2018 difference between shares and debentures last updated on november 19, 2018 by surbhi s nowadays, investment in shares and debentures has taken a dominant position in the society, as people of different ages, religion, sex, and race invest their hard earned money, with an aim of getting better returns. Section 284 of the companies act, 20 hereinafter referred to as act share. Preference shares and debentures are two different types of financial instruments. Traditionally, the government issued bonds, but these days, bonds are also being issued by semigovernment and nongovernmental organisations.

Please ask for specimen presentation of debenture certificate for different kinds of debentures pdf by click hereour teamforum members are ready to help you in free of cost. Introduction meaning of shares and share capital types of shares advantages and disadvantages of shares issue of shares meaning of debentures types of debenture advantages and disadvantages of debenture difference between shares and debenture contants. Sometimes convertible debentures are issued by a company and the debentureholders are given an option to exchange the debentures into equity shares after the lapse of a specified period. Debentures meaning, issue, features, types, advantages, disadvantages the term debenture is derived from the latin word debere which means to owe a debt. It tells us about the different types of shares and how they issue. Definition,type and issue of debentures caclubindia. It has the qualities of both equity shares and debentures. Following are some of the advantages of debentures.

Jan 10, 2020 there are different kinds of convertible debentures. The process of purchasing and selling shares often involves going through a stockbroker as a middle man. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories. The company can retain the right to redeem these debentures after giving due notice to the debentureholders. These debentures do not carry a specific rate of interest. Share your knowledge share your word file share your pdf file share your ppt file.

Preference shares also referred to as preferred shares are an equity instrument known for. As in case of debentures, fixed rate of dividends is paid to the preference shareholder, despite the profits earned by the company it is liable to pay interest to the preference shareholders. Study 45 shares and debentures flashcards from george e. A preference share is also preferred in repayment as compared to equity share. Define shares explain the different types of shares in. Bonds refer to a way of making a loan to a company or government agency. Hence when their period expires, debenture holders are paid back their principal amount. Interest on debenture is payable even if there is a loss. Ordinary shares must be part of the stock of all corporations, as defined in their articles of. Mar 04, 2011 even public company can collect money for financing its business by selling debentures in the market. May 26, 2010 10 prefrence share these are other type of shares.

The following are the different types of debentures issued by the company. Types of shares and debentures preferred stock financial capital. Even public company can collect money for financing its business by selling debentures in the market. Private limited pvt ltd companies have more than 2 and less than 50 members and their liability is limited or unlimited depending on the type of the company it is. Whether they issue shares or debentures totally depends upon the concerned. However, debentures issued at a discount can be converted either. Shares and debentures are common terms when it comes to investing in a business or a firm. The following are some of the differences between equity shares and debentures. Convertibility in debentures denotes conversion of a debenture to equity shares. Each share forms a unit of ownership of a company and is offered for sale so as to raise capital for the company. Redeemable debentures carry a specific date of redemption on the certificate. Debentures are popular means of raising funds by a company. Issue and redemption of debentures 77 b zero coupon rate debentures.

The holders of such debentures can not convert their debentures into the shares of the company. The income received from the ownership of shares is a dividend. Its important to understand these distinctions because the characteristics of different types of shares can significantly affect the. A debenture is a type of bond thats not secured by any asset. Difference between shares and debentures with similarities.

Maintenance of share certificate forms and related books and documents. The term debenture is derived from the latin word debere which means to a money owing. So it is one of the sources to raise capital or make up the deficiency in the capital account. In some companies, alphabet shares ordinary a shares, ordinary b. Redemption of preference shares debenture instrument of debt. Types of debentures the following are the important types of the debentures. The shares imply property rights to its owner and depending the type of share, have right to vote in actionists board.

Apr 14, 2010 in case of bankruptcy or financial difficulties, the debenture holders are paid after the bondholders. A fixed rate of dividend is paid on preference shares. For starting a large scale organization there is a need for huge amounts of capital. Preference shares have the characteristics of both equity shares and debentures. A limited company may raise finance either by issuing shares or by raising loans. First debentures these debentures are redeemed before other debentures. Redemption of shares and debentures example 1 the following balance sheet was extracted from kepong bhd as at 31 march 2006. Nature and types a company is an artificial person created by law, having separate entity with a perpetual succession and a common seal. It was further agreed that the redemption to be wholly financed by new issue of 300,000 ordinary shares at rm1. Convertible debentures usually have a lower interest rate compared to non. Meaning of shares, equity share, preferential share. Power to impose restrictions on shares or debentures 243.