The main difference between bonds and shares of a company is that the legal nature of bonds is a certificate of ownership and shares are debentures; the holder of shares is a shareholder and bonds are a creditor of the company; the purchase of shares is a permanent investment and bonds have a certain liquidation period.
I, The differences between bonds and shares of a company are as follows.
1, The legal nature is different. Stock is a certificate of ownership, shareholders are legally entitled to specific property rights, i.e., equity, and the holder of the stock is the owner of the company; bond is a creditor's certificate, and the legal relationship between the bondholder and the bond issuer is that of a debt.
2, The legal rights and obligations are different. The holder of shares is a shareholder of the company, a member of the company, has the right to attend and vote in the shareholders' meeting, participate in the company's business decisions, and has the right to share in the dividends and the distribution of surplus property, but at the same time bears the risk and responsibility within its own shares: while the holder of a corporate bond is an outsider of the company, merely a creditor of the company, has the right to obtain interest and recover the principal according to the agreed period, but has no right to participate in the company's business They do not have the legal right to participate in the company's operations and are not entitled to share in the company's surplus property, but are entitled to priority over the company's shareholders in the settlement of debts in the event of liquidation. The bondholder is not liable for the company's operations.
3, The duration is different. The purchase of shares is a permanent investment and shareholders may not request the company to return the principal, it does not have a maturity date; whereas corporate bonds have a certain period of repayment, at which time the company must return the principal.
4, The risk and manner of return are different. In addition to preference shares, there is no fixed interest on shares, and the investor's income is closely related to the operating conditions of the company, and only after the company has made a profit can it receives interest and dividends, which is riskier; while corporate bonds have a fixed interest rate, regardless of whether the company is profitable, it must pay the bondholders the agreed interest.
II, Are corporate bonds liabilities?
Corporate bonds are not liabilities. Corporate bonds are marketable securities issued by a company in accordance with the statutory procedures and agreed to repay the principal and interest within a certain period of time. Based on the issuance of corporate bonds, a legal relationship between the holder of the bond and the issuer of the bond is formed with the repayment of principal and interest. Therefore, a corporate bond is a certificate of debt issued by the company to the bondholder.
III, What types of corporate bonds are there?
1, Asset-backed bonds, i.e. bonds secured by assets or a combination of assets specified by the bond issuer.
2, floating rate bonds, which are general financing instruments issued by companies with fixed medium to long-term funding needs and where the interest rate on the floating rate bonds is calculated on the basis of a formula based on other interest rates.
3, other types.
