NOTES

                    Debentures

                         Shares

1.

Debenture holders are the creditors of the company.

1.

Shareholders are the owners of the company.

2.

Debenture holders have no voting rights and consequently do not pose any threat to the existing control of the company.

2.

Shareholders have voting rights and

consequently control the total affairs of the company.

3.

Debenture interest is paid at a pre- determined fixed rate. It is payable, whether there is any profit or not. Debentures rank ahead of all types of shares for payment of the interest due on them.

3.

Dividend on equity shares is paid at a variable rate which is vastly affected by the profits of the company (however, dividend on preference

shares is paid at a fixed rate).

4.

Interest on debentures are the charges against profits and they are deductible as an expense in

determining taxable profit of the company.

4.

Dividends are appropriation of profits and these are not deductible in determining taxable profit

of the company.

5.

There are different kinds of debentures, such as Secured/Unsecured; Redeemable/

Irredeemable; Registered/Bearer; Convertible / Non-convertible, etc.

5.

There are only two kinds of shares–Equity Shares and Preference Shares.

6.

In the Company’s Balance Sheet, Debentures are shown under “Long Term Borrowings”.

6.

In the Company’s Balance Sheet, shares are shown under “Shareholder’s Fund” detailed in

‘Share Capital’ of Notes to Accounts.

7.

Debentures can be converted into other debentures or shares as per the terms of issue of debentures.

7.

Shares cannot be converted into other shares in any circumstances.

8.

Debentures cannot be forfeited for non-payment of call moneys.

8

Shares can be forfeited for non-payment of allotment and call moneys.

9.

At maturity, debenture holders get back their money as per the terms and conditions of redemption.

9.

Equity shareholders cannot get back their money before the liquidation of the company (however, preference shareholders can get back

their money before liquidation).

10.

At the time of liquidation, debenture holders are paid-off before the shareholders.

10.

At the time of liquidation shareholders are paid at last, after paying debenture holders, Trade payable, etc.