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Chapter 8
Loan capital versus share capital
Loan capital Share capital
Definition A debenture is a document A share is the interest of a
issued by a company shareholder in a company
containing an measured by a sum of money. It is
acknowledgment of its a bundle of rights and obligations.
indebtedness.
Voting rights A debenture is a creditor of A shareholder is a member (owner)
the company and therefore of the company and therefore has
has no voting rights. voting rights, depending on the
class of shares held.
Income A debenture has a Dividends depend on the
contractual right to interest, availability of profits.
irrespective of the availability
of profits.
Liquidation A debenture has priority with Shareholders receive repayment
respect to repayment. after creditors, but can participate
in surplus assets.
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