ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Marlow Ltd needs funds. It is considering issuing shares to Ayesha or taking a loan from her. Which of the following correctly describes a key difference between the two forms of finance?
A shareholder is a member and owner of the company, while a debenture holder is a creditor who has lent money. The debenture holder is entitled to interest and repayment of the loan, not to ownership rights such as voting.
- AA shareholder is an owner of the company, whereas a debenture holder is a creditor of the companyCorrect
- BA shareholder is a creditor of the company, whereas a debenture holder is an owner of the company
- CBoth shareholders and debenture holders are owners with a right to vote at general meetings
Explanation
Shareholders are members and owners of the company, with rights such as voting and dividends. Debenture holders have lent money, so they are creditors entitled to interest and repayment. The second option reverses the roles, and the third wrongly gives debenture holders ownership and voting rights.
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