Unlike shares, debentures do not confer ownership or voting rights to buyers. This is because debentures are issued solely to borrow money from debt markets and not to increase the number of shareholders. However, some debentures can be converted into shares.
Issuers typically pay interest during the lifetime of the debenture, while the principal is paid on maturity. In the United States, debentures are analogous to unsecured bonds and are backed solely by the creditworthiness of the issuer, according to Wikipedia. However, in countries such as the United Kingdom, debentures tend to be secured. Some types of debentures, referred to as convertible debentures, can be exchanged for shares of the issuing corporation. However, standard debentures are typically nonconvertible.
Unlike debentures, shares allow buyers to own part of the issuing corporation, determine the composition of a company's board of directors and get dividends. There are several types of shares, explains the Australian Securities Exchange. Ordinary shares have no atypical rights. They allow owners to share in dividends and grant them the right to vote during general meetings. Preference shares grant buyers a mix of special rights and restrictions. For instance, voting rights may be limited to certain periods of time or select circumstances.