Maharashtra HSC Board : Secretarial Practice (52) (Q.P. 2024 with Solutions)

Maharashtra HSC Board : 

Secretarial Practice (52) 

(Q.P. 2024 with Solutions)

Time: 3 Hrs.                                            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 numbers.

(4) Answer to every question must be started on a new page.

Q. 1. (A) Select the correct answer from the options given below and rewrite the sentences:    [20] (5)

(1) Finance is the management of company. affairs of the _____________

(a) monetary

(b) marketing

(c) production

Ans: (a) monetary

(2) Company can accept deposits from public, minimum for _____________ months.

(a) nine

(b) six

(c) twelve

Ans:  (b) six

(3) A company can issue _____________ convertible debentures.

(a) only partly

(b) only fully

(c) partly or fully

Ans: (c) partly or fully

(4) Debenture capital is a _____________ capital of a company.

(a) borrowed

(b) owned

(c) permanent

Ans: (a) borrowed

(5) _____________ is a return paid to creditors by the company.

(a) Dividend

(b) Interest

(c) Rent

Ans: (b) Interest

(B) Match the pairs:                (5)

Group ‘A	Group B
a) Capital Budgeting	(1) Unsecured Debenture
b) Regret letter	(2) 1956
c) Board of Directors	(3) Investment decision
d) Depository Act	(4) Allotment of shares
e) Final Dividend	(5) Decided and declared by Board of Directors
	(6) Financing decision
	(7) Decided by Board and declared by members
	(8) 1996
	(9) Power to issue debentures
	(10) Non-Allotment of shares

Ans: 

    

Match the pairs:                (5)

Group ‘A	Group B
a) Capital Budgeting	(3) Investment decision
b) Regret letter	(10) Non-Allotment of shares
c) Board of Directors	(5) Decided and declared by Board of Directors
d) Depository Act	(8) 1996
e) Final Dividend	(7) Decided by Board and declared by members

(C) Find the odd one :                (5)

(1) Debenture, Public Deposit, Retained earnings

Ans: Retained earnings

(2) Bonus shares, Rights shares, Employees Stock Option Scheme (ESOS)

Ans: Employees Stock Option Scheme (ESOS)

(3) Private company, Non-Eligible public company, Government company

Ans: Non-Eligible public company

(4) Depository, D.P., RBI

Ans: RBI

(5) Private Placement, Commercial Paper, Further Public Offer (FPO)

Ans: Further Public Offer (FPO)

(D) Correct the underlined words and rewrite the following sentences:        (5)

(1) Owned capital is temporary capital.

Ans: Owned capital is Fixed capital.

(2) FPO refers to offering of shares to the public for the first time.

Ans: IPO refers to offering of shares to the public for the first time.

(3) Dividend is recommended by shareholders.

Ans: Dividend is recommended by the Board of Directors.

(4) Deposit is a long term source of capital. 

Ans: Deposit is a Short term source of capital.

(5) A stock market is an important constituent of money market.

Ans: A stock market is an important constituent of Capital market.

Q. 2. Explain the following terms / concepts (Any FOUR):            [8]

(1) Fixed capital

Ans: Fixed capital is the capital which is used for buying fixed assets which are used for a longer period of time in the business. These assets are not meant for resale. 

 In simple words fixed capital refers to capital invested for acquiring fixed assets. It stays in the business for long period almost permanently. Examples of fixed capital are - capital used for purchasing land and building, furniture, plant and machinery etc. Such capital is required usually at the time of establishment of a new company. However, existing companies may also need such capital for their expansion and development, replacement of equipments, etc.

(2) Borrowed capital

Ans: Borrowed capital refers to funds obtained by a company or individual through borrowing from external sources, typically in the form of loans or debt instruments. This capital is distinct from equity capital, which represents funds raised by issuing shares or ownership stakes in the company.

Borrowed capital can be acquired from various sources, including banks, financial institutions, bondholders, or private lenders. Companies may borrow capital for a variety of reasons, such as financing expansion projects, purchasing equipment or inventory, meeting short-term cash flow needs, or refinancing existing debt.

(3) Bonus shares

Ans: Bonus shares are issued as gift to equity shareholders. These shares are issued free of cost to existing equity shareholders. These are issued out of accumulated profits. Bonus shares are issued in proportion to the shares held. Thus capital investment of (ordinary) equity shareholder tends to grow on its own. This benefit is available only to the equity shareholder.

(4) Depository system

Ans: Under Depository System, securities are held in electronic form. The transfer and settlement of securities are done electronically. The Depository System maintains accounts of the shareholder, enables transfer, collects dividends, bonus shares, etc. on behalf of the shareholder. This system is also called as scripless trading system.

(5) Secondary market

Ans: Secondary market is more commonly known as the stock market or the stock exchange. Here the previously issued securities are bought and sold by the investors. After IPO, when the shares are listed at the Stock Exchange, they can be traded in the secondary market. In this market the securities are traded between investors.

(6) Stock Exchange

Ans: Stock exchange is a specific place where various types of securities are purchased and sold. The term securities include equity shares, preference shares, debentures, government securities and bonds, etc. including units of Mutual Funds. Stock markets act as intermediary between investors and borrowers. To provide safety and stability to the investors, Stock exchanges in India are regulated by SEBI.

Q. 3. Study the following case / situation and express your opinion (Any TWO):    [6]

(1) Violet Ltd. company plans to raise ₹10 crores by issuing debentures The Board of Directors have come queries. Please advise them on the following:
(a) Can they issue convertible debentures?
(b) As the company is offering debentures to its members, can such debentures have normal voting rights?
(c) Capital raised by issuing debentures will be Owned Capital or Borrowed Capital?

Ans: 

(a) Convertible Debentures: Yes, Violet Ltd. can issue convertible debentures if it so desires. Convertible debentures are debt instruments that can be converted into equity shares of the company after a certain period of time, as specified in the terms of the debentures. This feature allows the debenture holders to participate in the potential upside of the company by converting their debt holdings into equity ownership.

(b) Voting Rights: Generally, debenture holders do not have voting rights in the company's affairs as they are creditors and not owners of the company. However, if the company decides to offer debentures with normal voting rights to its members, it would be a unique arrangement. In such a case, debenture holders would have the same voting rights as shareholders. This decision would need to be explicitly stated in the terms and conditions of the debenture issuance.

(c) Capital Classification: The capital raised by issuing debentures would be classified as borrowed capital. Debentures represent debt obligations of the company, and the funds obtained through debenture issuance constitute borrowed funds that must be repaid to the debenture holders according to the terms of the debenture agreement. Unlike equity capital, which represents ownership in the company, debenture capital represents a liability on the company's balance sheet and does not confer ownership rights to the debenture holders.

(2) Mr. Satish holds 100 shares of Raj Company Ltd. in physical mode and wishes to convert the same into electronic mode:
(a) Mr. Satish holds a Savings Bank Account with SBI. Can he deposit his shares in this account for demat?
(b) What type of account is needed for the same?
(c) Is it the RBI which will be the custodian of shares of Mr. Satish after demating?

Ans: 

(a) Deposit in Savings Bank Account: No, Mr. Satish cannot deposit his physical shares directly into his Savings Bank Account with SBI for dematerialization. Dematerialization involves converting physical share certificates into electronic form and holding them in a demat account with a registered depository participant (DP), not in a bank account. However, once the shares are dematerialized, Mr. Satish can sell or transfer them through his bank account linked to his demat account.

(b) Type of Account: Mr. Satish needs to open a demat account to convert his physical shares into electronic mode. A demat account is a specialized account maintained by a registered depository participant (DP) to hold securities, such as shares, in electronic form. This account facilitates the trading, transfer, and safekeeping of securities in the electronic format. Mr. Satish can approach a DP, such as a bank, brokerage firm, or financial institution, to open a demat account.

(c) Custodian of Shares: No, it is not the Reserve Bank of India (RBI) that will be the custodian of Mr. Satish's shares after dematerialization. Instead, the shares will be held by a registered depository participant (DP) in his demat account. The two primary depositories in India are the National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL). These depositories electronically hold securities on behalf of investors through their network of DPs. The RBI's role primarily involves regulatory oversight of the banking and financial system, including aspects related to securities trading and settlement, but it does not directly handle individual securities holdings.

(3) GOLD Co. Ltd. declares a dividend of 10/- per share for F.Y. 2019-2020:
(a) Is company under default, if dividend was not paid within 30 days of its declaration?
(b) Is company right in transferring the unpaid dividend to its Debenture Reserve Account?
(c) Does the company have to transfer the amount of unpaid dividend to IEPF after 30 days?

Ans: 

Here are the responses to the queries regarding the dividend declaration by GOLD Co. Ltd. for the financial year 2019-2020:

(a) Default for Non-payment within 30 Days: Yes, if the dividend declared by GOLD Co. Ltd. is not paid within 30 days of its declaration, the company would be considered under default. As per the Companies Act, 2013, companies are required to pay dividends to shareholders within 30 days from the date of declaration. Failure to do so would result in the company being considered in default, and it may be liable for penalties or other regulatory actions.

(b) Transfer to Debenture Reserve Account: No, the company cannot transfer the unpaid dividend to its Debenture Reserve Account. The Debenture Reserve Account is specifically meant for creating a reserve for the redemption of debentures issued by the company. Unpaid dividends are typically transferred to a separate account called the Unpaid Dividend Account, which is used for holding unpaid or unclaimed dividends until they are claimed by shareholders.

(c) Transfer to IEPF (Investor Education and Protection Fund) after 30 Days: Yes, if the unpaid dividend remains unclaimed for a specified period, typically seven years, the company is required to transfer the amount of unpaid dividend to the Investor Education and Protection Fund (IEPF) established by the government. The IEPF serves as a repository for unclaimed dividends, matured debentures, and other amounts pertaining to shareholders, and it aims to protect the interests of investors. The transfer of unpaid dividends to the IEPF helps ensure that shareholders have an opportunity to claim their rightful dividends even if they have not done so within the specified timeframe.

Q. 4. Distinguish between the following (Any THREE):        [12]

(1) Fixed capital and Working capital

Ans: 

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.
Sources	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.
Objectives of Investors	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) Rights shares and Bonus shares

Ans: 

Ans: 

	Right Issue	Bonus Shre
1.meaning	In rights issue, shares are offered to the existing equity shareholders i.e. Company offers the shareholders the first option to buy the shares of the company.	Bonus shares are issued to the existing equity shareholders free of cost.
2. Payment	Subscribers have to pay for the Rights Shares. Company only gives them a right to buy these shares.	Bonus shares are issued free of cost to the shareholders.
3. Partly / fully paid up shares	Shareholders have to pay for these shares as Application Money, Allotment, Call Money etc. till the full money on shares is paid up	Bonus shares are fully paid up shares. So no money has to be paid by the shareholders to the company
4. Minimum Subscription	Company has to obtain minimum subscription. If the company fails to receive minimum subscription, it has to refund the entire application money received.	There is no minimum subscription to be collected as Bonus shares are issued free of cost by the company
5. Right to Renounce	The shareholders can renounce his shares.	Shareholders cannot renounce his bonus shares
6. Purpose of Issue	Rights issue is done by a company when it wants to raise fresh funds but wants to give a chance to their existing members to increase their shareholding.	When company has accumulated huge profits or reserves and company wants to reward its existing Equity shareholders, company issues Bonus shares.

(3) Dematerialization and Rematerialization

Ans: 

Point	Dematerlization	Rematerlization
1. Meaning	Process of converting Physical certificates of securities into electronic form.	It is the process of conversion of electronic form of securities into physical form.
2. Conversion	Here, the paper form of securities is converted in to digitally/ electronically held securities.	Here, the electronic records are converted into physical/paper form securities.
3. 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.
4. 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.
5. Identification of Securities	Demated securities have no distinctive numbers. They are fungible	Remated securities will have certificate and distinctive numbers as issued by company.
6. Securities Maintenance Authority	Depository is the custodian of securities and records.	The issuing company is the record keeping authority. Securities are maintained by the investor.
7. . Difficulty of Process	Demat is an easy process. Also its not a time consuming process	Remat is not only a time consuming but also a complex process

(4) Dividend and Interest

Ans: 

Points	Dividend	Interest
Meaning	Dividend is the return payable to the shareholders of the company for their investment in the share capital.	It is the return payable to the creditors of the company viz. Debenture holder / Deposit holders for the loan given by them to the company
Given to whom	It is paid to the member i.e. the owners of the company.	It is paid to the creditor of the company.
Obligation	It is to be paid only when company has made profits. Therefore no obligation / compulsion to pay dividend.	It is not linked to the profits of the company. Payment of interest is an obligation and is to be paid by the company compulsorily.
When payable	It is payable when a company earns sufficient profit in a year after fulfilling all obligations.	It is payable every year irrespective of the profits of the company.
Rate	It is paid at a fluctuating rate to the equity shareholders since it is linked to the profits of company.	Rate of interest is fixed and pre[1]determined at the time of issue of the security
Resolution	Payment of Final Dividend requires a Board resolution and an ordinary resolution at the AGM while Interim Dividend can be paid by passing only a Board Resolution.	Payment of interest does not require passing of a resolution at any meeting.
Accounting Aspects	Dividend is an appropriation of profit	Interest is a charge on profit.

Q. 5. Answer in brief (Any TWO):                [8]

(1) Explain Employee Stock Option Scheme.

Ans: Under this scheme, permanent employees, Directors or officers of the company or its Holding Company or Subsidiary company are offered the benefit or right to purchase the Equity Shares of the company at a future date at a pre-determined price.

ESOS encourages employees as they feel proud to be owners of the company for which they are working and company also benefits as it can retain good employees.

(2) State any four terms and conditions regarding acceptance of deposits.

Ans: TERMS AND CONDITIONS FOR ACCEPTANCE OF DEPOSITS : 

1. Amount of Deposit :

 A) Private Company : A Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100 percent of its aggregate of paid up share capital and free reserves.

However, certain class of Private Companies as specified by the Companies Act, can accept deposits more than 100 percent of its aggregate of paid up share capital and free reserves.

B) Public Company other than Eligible Company : These Companies cannot accept fresh deposit from members if the amount of such deposits together with the previous deposits exceeds 35% of the aggregate of the paid up share capital and free reserves of the company. 

C) Eligible Public Company :

D) Government Company can accept deposits from public not exceeding 35% of the paid up share capital and free reserves of the company.

2. Period / Tenure of Deposit : 

No deposit can be accepted or renewed which is to be repaid within a period of six months or more than thirty six months.

In certain circumstances, a company may accept deposits repayable earlier than six months to meet its short term needs. Such deposits must have a tenure of minimum three months and the amount of such deposits cannot be more than 10% of aggregate of the paid up share capital and free reserves of the company. Under certain circumstances, on the request of the depositor, company makes premature repayment of deposits. Company may also renew its deposits with the same terms of issue and it will be considered as fresh deposits.

3. No demand deposit : Company cannot accept or renew deposits repayable on demand.

4. Secured or Unsecured Deposit : A company can accept secured or unsecured deposit which should be clearly mentioned in the circular or advertisement inviting deposits. If a company offers secured deposits, it has to create a charge on its tangible assets within 30 days of acceptance of deposits.

5. Application Form : A company has to provide application form. It should contain a declaration by the applicant that the deposit he is making is not made out of any money borrowed by him from another person.

6. Joint names : Company can accept deposits in joint names of depositors. But there should not be more than 3 names.

7. Nomination : Every depositor at any time, has the right to nominate any person as nominee in the event of death of the depositor

(3) Explain the features of Interim Dividend.

Ans: INTERIM DIVIDEND - 

MEANING : Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend. Interim dividend is paid in the middle of the accounting year i.e. before the finalisation of annual accounts for the year. Opinion of the company’s Auditors should be taken before declaring Interim Dividend. 

Features of Interim Dividend : 

1. The Board of Directors has the power to declare Interim Dividend. 

2. Interim Dividend is only a payment on account of the whole dividend for the year. 

3. Company should provide depreciation for the entire year and not proportionately for a part of the year before declaring Interim Dividend. 

4. Interim dividend cannot be paid out of any reserves. 

5. Articles of Association of the company must authorize the Board of Directors to declare Interim Dividend. 

6. The Board Meeting has to pass a resolution for declaring the Interim Dividend. 

7. The amount to be given as Interim Dividend must be credited in a separate Bank account in a scheduled bank within 5 (five) days of its declaration. 

8. Interim Dividend should be paid within 30 days of its declaration. 

9. Unpaid / Unclaimed Interim Dividend should be transferred to ‘Unpaid Dividend Account within 7 days of the expiry of 30 days of declaration i.e. 37 days of its declaration. 

10. Any amount remaining unpaid/unclaimed in the ‘Unpaid Dividend A/c’ for 7 (seven) years should be transferred to IEPF

Q. 6. Justify the following statements (Any TWO):            [8]

(1) Bond holder is creditor of the company.

Justification:

a)      A bond is a debt security. It is a loan. A bond is a formal contract to repay the borrowed money with interest.

b)     It is an interest bearing certificate issued by the government, semi-government, or business firms to raise capital.

c)      The person holding such an instrument is known as a bond holder. He becomes the creditor of the company.

d)     As a bond holder is the creditor of the company, he does not enjoy any voting rights and cannot participate in the management of the company.

e)     Thus, it is rightly justified that, the bond holder is a creditor of the company

(2) A company has to create charge on its assets for issuing secured debentures.

Ans: 

A company has to create charge on its assets for issuing secured debentures and which can be justified with the following:

1) All secured debenture should be redeemed within 10 years from the date of its issue. Company has to create on the assets of the company or its subsidiary company or holding company.

2) The value of charges should be adequate to cover the enter value of debentures issued and interest to be paid on it. IF a governments company issue secured debentures which has Central or State Government's guarantee, then it need not create any charges on its assets.

3) All secured debentures have to be secured by the assets of the company. In simple word. assets of the company are mortgaged or used as a collateral security to issue secured debentures.  

(3) Capital market is useful for corporate sector.

a) Capital market is the market for borrowing and lending long-term capital required by business enterprises.

b) The capital market links investors with the borrowers of funds. It routes money from savers to entrepreneurial borrowers.

c) Through this market, corporates, industrial organizations, and financial institutions access long-term funds from both domestic and foreign markets.

d) Primary or New Issues Market- here companies sell fresh shares, debentures, etc. for the first time to the public.

e) Secondary Market – here already existing shares, debentures, etc. are traded through the Stock Exchanges.

f) Hence, Capital market is useful for corporate sector.

(4) Stock exchange works for the growth of the Indian Economy.

Ans: 

Capital Formation and Investment: The stock exchange provides companies with a platform to raise capital through the issuance of stocks and bonds. This capital is crucial for businesses to invest in infrastructure, technology, and innovation, driving economic growth. For instance, companies can use funds raised through Initial Public Offerings (IPOs) to expand operations, develop new products, or enter new markets, all of which contribute to economic development.

2. Facilitating Entrepreneurship and Innovation: The stock market encourages entrepreneurship by providing a means for innovative startups to access funding. By listing on the stock exchange, these companies can attract investment from a wide range of investors, including institutional funds and retail investors. This facilitates the growth of new ventures and fosters innovation, which are key drivers of economic progress.

3. Improving Corporate Governance: Listed companies are subject to stringent regulatory requirements and disclosure norms enforced by regulatory bodies such as the Securities and Exchange Board of India (SEBI). Compliance with these regulations enhances transparency, accountability, and corporate governance standards, which, in turn, instills investor confidence and attracts both domestic and foreign investment. Strong corporate governance practices are essential for sustaining long-term economic growth and stability.

4. Wealth Creation and Financial Inclusion: Participation in the stock market provides individuals with an opportunity to invest in the growth of the economy and accumulate wealth over time. As stock prices rise, investors benefit from capital appreciation and dividends, leading to the creation of wealth. Moreover, initiatives such as mutual funds, exchange-traded funds (ETFs), and systematic investment plans (SIPs) promote financial inclusion by allowing a diverse range of investors, including those from rural and semi-urban areas, to participate in the stock market.

5. Indicator of Economic Health: The performance of the stock market often serves as a barometer of the overall health of the economy. Bullish trends may indicate optimism about future economic prospects, leading to increased investment and consumer spending, while bearish trends may signal concerns about economic uncertainty. As such, movements in stock market indices such as the Sensex and Nifty provide valuable insights into the state of the economy, guiding policymakers and investors in their decision-making processes.

6. Job Creation and Economic Activity: A vibrant stock market stimulates economic activity and job creation by attracting investment, fostering entrepreneurship, and facilitating business expansion. As companies grow and prosper, they create employment opportunities across various sectors of the economy, contributing to income generation and consumption. Additionally, the financial services industry, including brokerage firms, investment banks, and asset management companies, plays a crucial role in supporting the functioning of the stock market and generates employment opportunities.

Q. 7. Attempt the following (Any TWO):            [10]

(1) Write a letter to the member for the payment of dividend through Dividend Warrant.

Ans: 

(2) Write a letter to the debenture holder regarding payment of interest electronically.

Ans:

(3) Write a letter to depositor regarding renewal of his deposit..

Q. 8. Answer the following questions (Any ONE):            [8]

(1) What are Preference Shares? Explain its types in detail.

Ans: 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

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

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.

Ans: 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. Appointment 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.

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.

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.

1.	Choose the Correct Option	Solution	5 Marks
2	Complete the Correction	Solution	5 Marks
3	Give Economic Term	Solution	5 Marks
4	Find the Odd Word	Solution	5 Marks
5	Complete the following Statements	Solution	5 Marks
6	Assertion and Reasoning Questions	Solution	5 Marks
7	Identify and Explain the Concepts	Solution	6 Marks
8	Distinguish Between	Solution	6 Marks
9	Answer in Brief	Solution	12 Marks
10	State with Reasons, Do you Agree/ Disagree	Solution	12 Marks
11	Table, Diagram, Passage Based Questions	Solution	8 Marks
12	Answer in Detail	Solution	16 Marks