Difference between Shareholders and Creditors-ICSE, Class 10, Commercial Studies

Difference between Shareholders and

Creditors-

1. Shareholders are the members of the company whereas creditors are not
the members of the company. 

2. Shareholders get a share in the profits of the company in the form of dividends. Creditors do not get a share in the profits of the company. The only thing they receive is the interest on their loan. 

3. Shareholders invest capital in the company whereas creditors do not invest capital in the company. Creditors only give loans to the company. 

4. Since shareholders are the
members of the company they are internal stakeholders of the company. Since the
creditors are not the members of the company they are considered as external
stakeholders. 

5. Shareholders assume a greater risk of loss of their money (the money which they have invested in the form of capital in the company). This is because when the company is closed down shareholders are the last to get their money back. In the case of Creditors, there is less risk of losing money which they have given to the company in the form of loans. This is because, at the time of winding up or the closure of the company, creditors are paid before the shareholders. Creditors get their money before the shareholders get their money.