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Broadly, the popular debenture instruments used by FPIs are of three kinds: Non-convertible debentures (NCD), Compulsorily Convertible Debentures (CCDs), and Optionally Convertible Debentures (OCD). NCDs are pure debt instruments. NCDs are very much like a bank loan, except in the way NCDs can be redeemed.

The major types of debentures are:Registered Debentures: Registered debentures are registered with the company.Bearer Debentures:Secured Debentures:Unsecured Debentures:Redeemable Debentures:Non-redeemable Debentures:Convertible Debentures:Non-convertible Debentures:More items...?Aug 6, 2018

You can give ordinary shares or preference shares to investors. Each share gives different rights to investors. Typically, ordinary shares are the common type of share issued to founders and employees, while preference shares are issued shares to investors wanting to secure their return.

Preference sharesalso referred to as preferred sharesare an equity instrument known for giving owners preferential rights in the event of a dividend payment or liquidation by the underlying company. A debenture is a debt security issued by a corporation or government entity that is not secured by an asset.

A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.

In the event of winding up, debentures get priority of repayment over shares. Shares cannot be converted as opposed to debentures are convertible. There is no security charge created for payment of shares. Conversely, security charge is created for the payment of debentures.

Preference shareholders are the partial owners of the company whereas debenture holders are creditors of the company.Returns on preference shares are paid in terms of dividend, on the other hand, in case of debentures it is paid in the form of interest.