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Debenture holders are creditors of the company. They get paid1st when the company is liquidated. Both preference and equity share holders are owners of the company.When the company does not want to have more creditors it is prudent not to go for debentures but shares to finance the expansion.
Preference Share: Preference shares allow an investor to own a stake at the issuing company with a condition that whenever the company decides to pay dividends, the holders of the preference shares will be the first to be before equity shareholders.
Equity Shares:" Equity share" means, with reference to any such company, all share which is not preference share and doesnt have any preferential rights:
(a) Preference of dividend over others.
(b) (b) Preference for repayment of capital over others at the time of winding up of the company.
Debentures:A debenture is a unit of loan amount,When a company intends to raise a loan amount from public it issues debentures.holder of debenture is acalled debenture holder and he/she is creditor of the company.
