Shares and Debentures FAQs What are the main differences between shares and debentures? The primary difference between issuing debentures and shares is that debentures are loan instruments and not equity instruments and represent a loan to be repaid by the company with interest at a fixed rate. On the other hand, shares represent ownership interests and voting rights. Debenture holders are creditors of the company, while shareholders are owners of the company. When a company issues debentures, it borrows money and incurs a liability. When a company issues shares, it sells ownership interests and does not incur liability. Are there any risks associated with investing in either shares or debentures? Yes, both types of investments offer advantages and risks for investors to consider before making any decisions. It is important to understand the differences between shares and debentures before investing in either one. Risk factors may include, but are not limited to, market volatility, credit risk (with regards to fixed-income securities), liquidity risk, and inflationary pressures. Ultimately, it is up to each individual investor to decide which financial instrument best suits their needs and risk tolerance. What types of debentures exist? There are several different types of debentures that companies can issue: registered debentures or bonds; redeemable debentures or bonds; irredeemable debentures or bonds; and convertible debentures. Each of these has different terms and conditions associated with it and should be carefully reviewed before investing in any of them. Can debentures or bonds be converted into shares? Yes, many debentures have an option for conversion into ordinary or preference shares of the company during a certain period mentioned in the conditions of the issue. However, this option is at the discretion of the issuer and may not always be available. Investors should check with the issuer to determine if such an option exists. What is the process for buying and selling bonds or debentures? Bonds or debentures can be bought directly from issuers on primary markets, traded on secondary markets, or purchased through financial advisors or brokers. When selling securities, investors must ensure they are done so at fair market value to avoid incurring losses due to price fluctuations. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.