Difference Between company Shares and Debentures

company Debenture and Shareholders
company Debenture and Shareholders

The term ‘debenture is an acknowledgement of the indebtedness by the company ,setting out terms and conditions of indebtedness and including debenture stock, bonds and any other securities of a company whether constituting a charge on the asset of the company or not.

Therefore debenture means a document which either creates a debt or acknowledge it. and any document which fulfills either of the conditions consisting of a debt own by the company to another ,secured by deed which prescribed the condition for the realization of the debt.

Debenture stock is borrowed money consolidated into one mass for the sake of convenience.One major advantage of debenture stock is that it is transferable into fractional amount. Each debenture stockholder is given debenture certificate showing his own part of the whole loan.

You can also read : Nigeria debt as a April,2019 stands at about N24.3tn

Types of Debenture

Four type of denture exist: These are

Perpetual debentures

They may be made irredeemable or redeemable on the happening of the contingency ,however, remote, or on the expiration of the prod ,however, long ,any rule of equity of the contrary notwithstanding.

Convertible Debenture

This are denture issued upon the term that is lieu of redemption or repayment , they may at the option of the holder or the company ,be converted into share in the company upon such terms as may be stated in the debentures.

Secured or Naked Debenture

Where debenture are secured by a charge over the company’s property ,are said to secured debenture. Debenture may be secured by fixed charges on certain of the company;s property or a floating charges over the whole or a specified part of the company’s undertaking the assets or both a fixed charge on certain property or a floating charge.

Redeemable Debenture
These are debenture issued by a company limited by shares and which are ,or at the option of the company are to be liable redeemed.

Creation and content of a debenture.

A debenture may be created by a simple instrument or by deed. every debenture is required to contain statement on the following.

i.] the principal amount borrowed
ii] maximum discount, which may be allowed and the maximum premium at which debenture maybe made redeemable.

iii] The rate and date on which interest and manner in which payment shall be made.
iV] When the principal sum is due and manners in which redemption shall be effected
v] In case of converted debenture ,the date and terms on which they may be converted into shares
vi ] The charge securing the debenture and the condition on which the debenture shall effected.

Register of debenture

A company which issues or has issued debenture shall maintain a register of the holders thereof .The register is required to contain the following.

i. ]The name and addresses of the debenture holder
ii] The principal amount of the debenture held by each of them
iii] The amount of premium payable on redemption of the debenture

iv ] The issue price of the debenture and the amount paid upon on the issue price.
v] Dte on which person was entered in the register in the debenture holder.
VI] Date on whch he ceased to be a debenture holder.

Right of a debenture

The right ensuring a debenture holder are usually stated in the debenture or trust deed. The primary right is that the repayment of the money lent to the company with agreed interest .The debenture holder may sue the company for the payment of any amount payable to him in respect pof the debenture or the trustee of the debenture trust deed covering the debenture he hold for compensation for any breach of the duties which the trustee owns him.

Shares

A public company is empowered to allot shares to shareholders.
The word allotment and transfer of share have different meaning,and connotation.the similarities between them are the fact that they are both mode of acquiring share in the company.

A shareholder owns a company through the purchase or acquisition of shares; a director is appointed by those shareholders to manage the operational activities of a company.

However, a shareholder can also be a director. This is very common in small companies and start-ups. In many cases, just one person will assume the role of sole shareholder and sole director.

Shareholders receive a portion of company profits in relation to the number and value of their shares.

They are not responsible for the day-to-day activities of the business, unless they are also directors. Company owners will only make decisions about significant matters such as changing the name of the business, appointing or removing directors, changing directors’ powers and altering the articles of association.

Share is a unit of ownership that represents an equal proportion of a company’s capital. It entitles its holder (the shareholder) to an equal claim on the company’s profits and an equal obligation for the company’s debts and losses.

People who own shares in a company are called shareholders or stockholders. Shareholders receive income from the shares they own on a routine basis – these are called dividend payments.

You can also read : Difference Between company Memorandum of Association and Articles of Association

Two major types of shares are (1) ordinary shares and preference shares

ordinary shares

Ordinary shareholders have voting rights and receive dividends according to profit levels. Whereas preferred shareholders don’t usually have voting rights but have priority in the payment of dividends.

preference shares

preferred stock) which entitle the shareholder to a fixed periodic income interest but generally do not give him or her voting rights.

share valued

share’s value is what people are willing to pay for it if is on sale. Shares are not sold at any given time though – the transaction of shares strongly depends on the liquidity of the market.

You can also read : How to Register your Company/Business in Nigeria with CAC

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