Differences between Debentures and preference share capital?
Answer Posted / neerajkumar.che
hello,
The difference between debentures and preference capital is
that debentures are the debt instrument issued by the
company , which could be secured or unsecured.Debentures
also have call option,convertiblity option.Debentures
holder do not hold the voting right.Debentures could be
converted into common shares.Debentures hold the coupon
payment.At the time of liquidation of the company they are
above the preference shareholders in getting back their
money.They do not have any liblity.
Preference share is long term equity capital of the
company.This is liablity owed by business to
shareholder.Preference share holders are entitled to get
the share dividend before common share holders.They too, do
not enjoy the voting right in annula general meeting of the
company,but voting right can be grated to them in condition
where company deferred the payment of dividend for
consecutive 3 years.They have limited liblity toward the
amount of their investment in the company.
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