ICAEW BL · Chapter 9 · Question 9 of 10
Which of the following correctly distinguishes a debenture holder from an ordinary shareholder?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A debenture holder is a creditor of the company and is entitled to interest whether or not profits are made
Explanation
A debenture is a written acknowledgement of a debt. The holder is a creditor, not a member, and is entitled to interest as a contractual debt regardless of profits. Debenture holders rank ahead of shareholders in a liquidation. Shareholders are members who vote and receive dividends only when declared out of distributable profits.
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