Maharashtra HSC Board :
Secretarial Practice (52)
(Q.P. 2022 with Solutions)
Time: 3 Hrs. Sub: Secretarial Practice Max. Marks: 80
___________________________________________________________________
Note: 1) All questions are compulsory.
2) Figures to the right indicate full
marks for the questions.
3) Figures to the left indicate
question members.
4) Answer to every question must be
started on a new page.
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sp Important Questions HSC 12th Std Board 2023: Click Here
Q.1. (A) Select the correct answer from the options given below and rewrite the sentences: (05)
1. ___________ is
related to money and money management.
a) Production b) Marketing c) Finance
2. Secured debentures must be redeemed within __________
from the date of its issue.
a) 10 days b)
10-year c) 15 years
3) India has a __________ depository system.
a) Sole b)
Multi c) Single
4) Dividend is to be paid to the shareholders within
____________ from the date of declaration.
a) 30 days b)
40 days c) 20 days
5) Accumulated dividend is paid to ___________
preference share.
a) redeemable b)
cumulative c) convertible
B) Match the pairs.
|
Group ‘A’ |
Group ‘B’ |
|
a) Investment in
debenture |
1) Deals with
acquisition and use of capital |
|
b) financial
market |
2) Must inform
stock exchange about dividend declaration. |
|
c) Price of
shares mentioned in prospectus |
3) Trading of
financial securities. |
|
d) Corporate
financial |
4) Safe and
secured investment |
|
e) Listed company |
5) Must inform government
about dividend declaration. |
|
|
6) Fixed price
issue method |
|
|
7) Risky
investment |
|
|
8) Trading of
commodities |
|
|
9) Deals with
acquisition and use of assets. |
|
|
10) Book-
Building Method. |
C) State whether the following statement are True or False: (5)
1) Dividend can be paid out of capital. (False)
2) deposit can be accepted for a maximum of 6 months.
3) Depository bank stores the shares on behalf of GDR
holder.
4) Securities market is an unorganized market place in
India.
5) Bonus shares are fully paid-up shares.
D) Correct the underlined word and rewrite the
following: (5)
1) Depositors are owners of the company.
2) Retained earning is an external source of
finance.
3) To rate its debentures, a company appoints underwriters.
4) Companies sell fresh shares for the first time to
the public in secondary.
5) Preference shareholders get dividend from
residual profits.
Q.2. Explain the following terms/ concepts (Any FOUR): [8]
1) Production Cycle
Ans:
The process of converting raw material into finished goods is called production cycle.
If the period of production cycle is longer, then firm needs more amount of working
capital. If manufacturing cycle is short, it requires less working capital.
2) Overdraft
Ans:
A company having current account with bank is allowed overdraft facility. The borrower can withdraw funds as and when needed. He is allowed to overdraw on his current account, up to the credit limit which is sanctioned by bank. Within this stipulated limit any number of drawings are permitted. Repayments can be made whenever required during the time period. The interest is determined on the basis of actual amount withdrawn.
3) Employee Stock Purchases scheme (ESPS)
Ans: (Any 4 points with Meaning)
Under this scheme the company offers
Equity shares to its employees at a discounted price which they can buy at a future
date. The company deducts a certain amount from the salary of the employee towards
the payment for the shares.
Provisions : Company must fulfill the following provisions __
a) Different number of shares can be offered to different categories of employees.
b) Shares issued through ESPS should be immediately listed.
c) ESPS shares will have a minimum of one year lock-in period from date of allotment if ESPS is not a part of public issue.
d) Company has to fulfill the provisions of SEBI (Shares Based Employee Benefits) Regulations, 2014.
e) Company has to get the approval of the shareholders through a special Resolution to offer ESPS.
4) Depository Participant (DP)
Ans: (Any 6 Points)
1. It is the agent of Depository
2. DP is registered under the SEBI Act. It enjoys rights and obligations as specified under SEBI (Depository and Participants) Regulations of 1996.
3. It is an intermediary appointed by Depository.
4. DP acts as a link between Depository and the investor.
5. It directly deals with customers. It sends statement of accounts periodically.
6. It functions like a securities bank.
7. It facilitates Demateralisation.
8. It credits securities in the event of Rights Issue, Bonus Issue, etc.
9. It handles instant transfers of pay-outs like dividend, interest, etc.
10. It settles trade electronically.
5) Rate of Dividend
Ans:
a) Dividend rate, expressed as a percentage or yield, is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
b) The Board of Directors in the Board Meeting decides the rate of dividend. The rate of final dividend is approved by shareholders in a shareholder’s meeting.
c) Equity shares are given dividend at fluctuating rate depending upon the profits of the company.
D) Preference shareholders get dividend at fixed rate.
6) Rights Issue
Ans:
When a company needs more funds for expansion purpose and raises further capital by issue of shares, the existing equity shareholders may be given priority to get newly offered shares. This is called ‘Right Issue’. The shares are offered to equity shareholder first, in proportion to their existing shareholding.
Q.3. Study the following cases/ situations and
express your opinion (Any TWO) : [6]
1) Sunflower limited company proposes to issue
debentures to the public to raise funds. After discussions, the Board of
Directors have decided to issue secured, redeemable, non-convertible debentures
with a tenure of ten years. Please advise the Board on following matters:
a) Should the company appoint Debenture Trustee?
Answer: Yes, the company should appoint a debenture trustee as it is mandatory to appoint trustee as and when a company decides to issue secured debentures.
b) Should the company create a charge on its assets?
Answer: All secured debentures are to be secured by creating charge over assets and therefore company should create a charge over assets.
c) Can the tenure of debentures be less than ten
years?
Answer: Yes, the tenure of debentures can be less than ten years.
2) ‘ABC’ Company Ltd. Is an eligible public company as per the Companies
Act, 2013, with reference to accepting public deposits:
a) Can the
company accept deposits in joint names?
Answer: Yes, the company can accept deposits in joint names but there should not be more than three names.
a) Should it
go to primary market or secondary market to issue its shares?
Answer: Joy ltd. Should go to primary market to issue its shares as they issuing it for the first time.
Answer: Joy ltd. Should offer it share through public offer to raise capital.
Q.4
Distinguish between the following (Any THREE) [12]
1) Fixed
Capital and Working Capital
|
Points |
Fixed
Capital |
Working
Capital |
|
Meaning |
Fixed capital
refers to any kind of physical asset i.e. fixed assets. |
Working capital
refers to the sum of current assets. |
|
Nature |
It stays in the
business almost permanently. |
Working capital
is circulating capital. It keeps changing. |
|
Purpose |
It is invested
in fixed assets such as land, building, equipments, etc |
Working capital
is invested in short term assets such as cash, account receivable, inventory,
etc |
|
Source |
Fixed capital
funding can come from selling shares, debentures, bonds, long term loans,
etc. |
Working capital
can be funded with short term loans, deposits, trade credit, etc. |
|
Objective |
Investors invest
money in fixed capital hoping to make future profit |
Investors invest
money in working capital for getting immediate returns. |
|
Risk |
Investment in
fixed capital implies more risk. |
Investment in
working capital is less risky. |
2) Transfer
of shares and Transmission of shares
|
Points |
Transfer
of Share |
Transmission
of Share |
|
Meaning |
Transfer of
shares means voluntarily or deliberately giving away one’s shares to another
person by entering into a contract with the buyer |
It means
transfer of ownership of a member’s shares to his legal representative due to
operation of law. It takes place on death, insolvency or insanity of the
members |
|
When Done |
It is done
when the member wants to sell his shares or give his shares as gift |
It is done
when the member dies or becomes insolvent or insane. |
|
Nature of Action |
It is a
voluntary action taken by the member. |
It is an
involuntary action. It is due to operation of law |
|
Parties
involved |
In transfer
of shares there are two parties involved- the member who is called as
transferor and the buyer who is called as transferee |
There is only
one party e.g. the nominee of the member in case of death of the member or
the legal representative. |
|
Instrument of
transfer |
Transfer
requires Instrument of transfer. It is a contract between the transferor and
transferee. |
No Instrument
of transfer is needed. |
|
Initiated by |
Transferor
initiates the transfer process |
Legal
representative or official receiver initiates the process of transmission |
|
Consideration |
Transfer of
shares is done often by the member to receive some consideration (money) i.e.
the buyer has to pay for the shares. (Except given as gift.) |
No
consideration is involved here. The legal heir or official receiver need not
pay for the shares |
|
Liability |
The liability
of the transferor ends after the shares are transferred. |
Original
liability of the member continues in case of transmission of shares |
|
Stamp Duty |
Stamp duty as
per the market value of shares has to be paid. |
No stamp duty
is to be paid |
3)
Dematerialisation and Rematerialisation
|
Points |
Dematerialization |
Remineralisation
|
|
Meaning |
Process of converting
Physical certificates of securities into electronic form.
|
It is the process of
conversion of the electronic form of securities into physical
form.
|
|
Conversion |
Here, the paper form of
securities is
converted into digital/ electronically
held securities.
|
Here, the electronic
records are converted
into physical/paper form
securities.
|
|
Use
of Form |
It uses ‘DRF’ Viz. ‘Dematerialization
Request Form’
from Investor to the DP.
|
It uses ‘RRF’ viz
Rematerialization Request
Form’ from Investor to the DP.
|
|
Sequence |
This is an initial process.
It is a primary
and Principal function of
the depository.
|
This is a reverse process.
It is a secondary
and supporting function of depository. Already demated securities are remated.
|
|
Identification
of Securities |
Demated securities have no distinctive
numbers. They are fungible.
|
Remated securities will have certificate
and distinctive numbers as
issued by company.
|
|
Securities
Maintenance Authority |
Depository is the custodian
of securities
and records.
|
The issuing company is the
record keeping
authority. Securities are maintained
b the investor.
|
|
Difficult
of Process |
Demat
is an easy process. Also it’s not a time-consuming process. |
Remat
is not only time-consuming but also a complex process. |
4) Primary
market and Secondary market
|
Points |
Primary Market |
Secondary Market |
|
Meaning |
The issue of new
shares by the company is done in the primary market. |
The securities
issued earlier are traded in the secondary market. |
|
Mode of
Investment |
Direct
investment in the securities. Securities are acquired directly from the
company. |
Indirect
investment as the securities are acquired from other stakeholders. |
|
Parties in
action |
The parties
dealing in this market are company and investors. |
The parties
dealing in this market are only investors. |
|
Intermediary |
The underwriters
are the intermediaries |
The security
brokers are the intermediaries. |
|
Value of
security |
The price of
security in the primary market is fixed as it is decided by the company |
The price of
security is fluctuating, depending on the demand and supply conditions in the
market. |
Q.5
Answer in brief (Any TWO): [8]
1) State the
features of bond.
Ans:
Bond is a debt security. It is a formal contract to repay borrowed money with interest. Bond is a loan. The holder of bond is a lender to the institution. He is a creditor of the company. He gets fixed rate of interest.
All bonds have maturity date and is paid in cash at certain date in future.
According to Webster Dictionary, ‘A bond is an interest bearing certificate issued by the government or business firm, promising to pay the holder a specific sum at a specified date.’
Thus a company borrows money and issues bonds as an evidence of debt. Interest is payable on bonds at fixed interval or on maturity of bonds.
Features
1. Nature of Finance : It is a debt Finance. It provides long term finance. The bonds can be issued for longer period i.e. 5 years, 10 years, 25 years, 50 years.
2. Status of bondholder : The bondholders are creditors. Since they are creditors and non-owners they are not entitled to participate in general meeting. They have no voting right and hence no participation in the management.
3. Return on bonds : The bondholder gets a fixed rate of interest. It is payable at regular interval or on the maturity of bond.
4. Repayment : Bonds have specific maturity date on when the principal amount is repaid.
2) Explain
any four advantages of depository system to investors.
Ans:
BENEFITS / ADVANTAGES OF DEPOSITORY SYSTEM
A) To Investors :
1) Elimination of Risk : All risks associated with physical certificates like delays, lost, theft, mutilation, bad deliveries, etc. are totally eliminated.
2) Safety : It is the most safe and secure way of holding securities. The entire system functions under the Depository Act and is monitored by SEBI. e.g. The Investor can keep his account in a ‘Freeze / Lock' mode to avoid / prevent unexpected debit or credit or both by giving instructions to the DP.
3) Easy Transfer of shares : (a) Efforts in filling transfer forms and lodging the documents is eliminated. (b) Also the stamp duty levied on transfer of physical shares is not applicable. (c) Processing time in transfer of securities is reduced and neither the securities nor the cash is tied / held up for unnecessarily long time.
4) Updates and Intimation : The investor is provided with the status of the holdings and transactions by DP and occasionally by the Depository too.
5) Security against Loan : Dematerialised securities are preferred by banks and financial institutions as security against loan.
6) No concept of ‘Lots’ : The system of odd and even lot stands abolished. The market lot is one share for dematerialised securities.
7) Nomination Facility : Individual Investors can avail of nomination facility. This simplifies the process in the event of the death of the investor.
8) Automatic Credit : The account of investor is automatically credited/debited in case of a change initiated by the company which impacts the securities. This is called ‘Corporate Action’. Few examples which can be termed as Corporate Action are : Payment of Dividend, Issue of Bonus Shares, Offering of Rights Shares, Early Redemption of Debentures, Mergers and Acquisitions, etc.
3) Explain
the features of interest.
Ans:
Meaning
In financial terms, it is a payment made for using money of another. i.e. Borrower takes money from the lender. So interest is the cost of renting money, for the borrower and it is the income from lending money for the lender.
Features
1) Interest is the price paid for the productive services rendered by capital.
2) It is directly related to risk. Higher the risk, higher is the interest.
3) Rate of Interest is expressed as annual percentage of Principal.
4) Rate of interest is determined by various factors like money supply, fiscal policy, volume of borrowings, rate of inflation etc
5) Interest is a charge against the profit of the company. Even if company makes no profit, interest should be paid.
6) It is payable at a fixed and generally pre-determined rate.
Company has to pay interest if it has borrowed money from creditors like Debentures holders, Depositors, Bond holders, etc.
Q.6
Justify the following statements: (Any TWO) [8]
1) The Board
of Directors can refuse transfer of share.
Ans:
a) Transfer of shares means voluntary transfer
of shares by a member of a company in favour of another person.
b) Board of Directors has the authority to refuse the registration of the transfer of shares.
c) The Board may refuse to register the transfer under the following conditions :
i) When the provisions for transfer of shares as given in the Articles of Association have not fulfilled
by the member.
ii) When the instrument of transfer is not as per the rules prescribed under the Companies Act.
iii) When the Instrument is not accompanied b the Share Certificate.
iv) When the company has a lien on the shares to be transferred.
d) Therefore board of directors can refuse transfer of shares.
2) The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India.
Ans:
a) The Securities and Exchange Board of India
(SEBI) is the regulator of the capital markets in India. The SEBI was
established in 1992 under the Securities and Exchange Board of India Act, 1992.
b) SEBI was set up with the objective of promoting the securities market, protecting the interest of the
investors in securities market, and regulating the securities market.
c) SEBI issues rules and regulations to be followed by the issuers of securities, the market
intermediaries, and the investors. It is a regulator of all the Stock exchanges in India.
d) SEBI also regulates the working of venture capital funds and collective investment schemes including mutual funds.
Thus, the Securities and Exchange Board of India (SEBI) is the regulator for the securities market in
India.
3) Unpaid
dividend cannot be used by the company.
a) The dividend declared by the company but
has not been paid to or claimed by a shareholder within 30 days of its
declaration is termed as an unpaid dividend.
b) The total amount of dividend which remains unpaid should be transferred to ‘Unpaid Dividend
Account’.
c) Any amount in the Unpaid Dividend Account of a Company that remains unpaid/unclaimed for a period of 7 years will be transferred to ‘Investors Education and Protection Fund’.
d) The company cannot use unpaid dividends.
e) The only claimant of money can claim it by following certain procedures.
Thus, it is rightly said that unpaid dividends cannot be used by the company.
4) A company
can issue duplicate share certificate.
Ans:
a) A company can issue a duplicate share
certificate if :
i) Original share certificate has been defaced, mutilated, or torn and is surrendered to the company.
ii) It has been proved by the holder that the original share certificate is lost or destroyed.
b) In case of loss of share certificate, the company puts up a notice in the newspapers to announce the loss of the Share Certificate.
c) If the company does not get any response from the public, within the specified time, then the company can issue a duplicate Share Certificate.
d) Duplicate share certificate should be issued within three months from the date of application.
The company issues it only to registered shareholders.
Thus it is rightly justified that, A company can issue a duplicate share certificates.
Q.7.
Attempt the following (Any TWO): [10]
1) Write a
letter to the member for the payment of interim dividend electronically.
2) Write a
letter to the debenture holder regarding payment of interest through interest warrant.
3) Draft a
letter of thanks to the depositor of a company.
Q.8.
Answer the following questions: (Any ONE) [8]
1) What is preference
share? Explain its types.
Preference Shares :
As the name indicates, these shares have certain preferential rights distinct from those attached to equity shares.
The shares which carry following preferential rights are termed as preference shares:
a) A preferential right as to payment of dividend during the life time of company.
b) A preferential right as to the return of capital in the event of winding up of company.
The holder of preference share have a prior right to receive fixed rate of dividend before any dividend is paid to equity shares. The rate of dividend is prescribed at the time of issue.
Normally preference shares do not carry any voting power. They have voting right only on matters which affect their interest, such as selling of undertaking or changing rights of preference shares, etc. or they get voting rights if dividend remains unpaid.
The preference shareholders are co-owners of the company but not controllers. These shares are purchased by cautious investors who are interested in safety of investment and who want steady returns on investments.
1. Cumulative Preference Shares : Cumulative Preference Shares are those shares on which dividend goes on accumulating until it is fully paid. This means, if the dividend is not paid in one or more years due to inadequate profits, then this unpaid dividend gets accumulated. This accumulated dividend is paid when company performs well.
The arrears of dividend are paid before making payment to equity shareholders. The preference shares are always cumulative unless otherwise stated in the Articles of Association. It means that if dividend is not paid any year, the unpaid amount is carried forward to the next year and so on, until all arrears have been paid.
2. Non-cumulative Preference Shares : Dividend on these shares does not get accumulated. This means, the dividend on shares can be paid only out of profits of that year. The right to claim dividend will lapse, if company does not make profit in that particular year. If dividend is not paid in any year, it is lost forever.
3. Participating Preference Shares : The holders of these shares are entitled to participate in surplus profit besides preferential dividend. The surplus profit which remains after the dividend has been paid to equity shareholders, up to certain limit, is distributed to preference shareholders.
4. Non-participating Preference Shares : The preference shares are deemed to be non-participating, if there is no clear provision in the Articles of Association. These shareholders are entitled to fixed rate of divided, prescribed at the time of issue.
5. Convertible Preference Shares : The holders of these shares have a right to convert their preference shares into equity shares. The conversion takes place within a certain fixed period.
6. Non-convertible Preference Shares : These shares cannot be converted into equity shares.
7. Redeemable Preference Shares : Shares which can be redeemed after certain fixed period of time are called redeemable preference shares. A company limited by shares, if authorised by Articles of Association, issues redeemable preference shares. Such shares must be fully paid. These shares are redeemed out of divisible profit only or out of fresh issue of shares made for this purpose.
8. Irredeemable Preference Shares : Shares which are not redeemable i.e. payable only on winding up of the company are called irredeemable preference shares. As per Section 55(1) of the Companies Act 2013, a company cannot issue irredeemable preference shares.
2) Explain
the provisions of Companies Act,2013 for issue of debentures.
Provisions for issues of debentures as per Companies Act, 2013.
Following are some of the provisions of the Act which a company has to comply while issuing debentures :
1. No voting rights : A company cannot issue debentures with voting rights. Debenture holders are creditors of the company and so they do not have any voting rights except in matters affecting them.
2. Types of Debentures : A company can issue secured or unsecured debentures and fully or partly convertible debentures or non-convertible debentures. To issue convertible debentures, a Special Resolution has to be passed in the General Meeting. All debentures are redeemable in nature.
3. Payment of interest and redemption : A company shall redeem the debentures and pay interest as per the terms and conditions of their issue.
4. Debenture Certificate : Company has to issue Debenture certificate to the debenture holders within 6 months of allotment of Debentures.
5. Create Debenture Redemption Reserve : Company has to create a Debenture Redemption Reserve account out of profits of the company available for payment of dividend. This money can be used only for redemption of debentures. As per companies (Share Capital and Debentures) Amendment Rules 2019, MCA has removed Debenture Redemption Reserve requirement for Listed companies, NBFCs and Housing Finance Companies.
6. Appoint of Debenture Trustees : If the company issues prospectus or invites more than 500 people, (either to Public or its Member) company has to appoint one or more Debenture Trustees. Debenture trustees protect the interest of the debenture holders.
Company has to appoint trustees by entering into a contract with them called as Debenture Trust Deed.
Debenture Trustees : They are institutions that protect the interest of Debenture holders.
7. Debentures Trustees can approach NCLT : Debenture Trustees have to redress the grievances of debenture holders. If the company defaults in repaying the principal amount, on maturity or defaults in paying interest there on, the Debenture Trustees can approach the National Company Law Tribunal for redressal. NCLT can direct a defaulting company to repay the principal amount or interest.
Grievances : Complaints Redressal : Remedy or compensation.
8. Impose restrictions : When the Debenture Trustee is of the opinion that the assets of the company are insufficient or likely to become insufficient to redeem the principal amount of debentures, it may approach the NCLT. NCLT can order a company to restrict incurring further liabilities so as to protect the interest of the debenture holders.
9. Punishment for contravention of provisions of the Companies Act : If the company fails to comply with any provisions of the Act, then the company and its officers shall be liable to pay fine or imprisonment or both as prescribed in the Act
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