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HSC Secretarial Practice Board Question Paper June 2023 Solved | Complete Answers

HSC Board Question Paper: July 2023 - Secretarial Practice | Solved
Question Paper Page No. 1 Question Paper Page No. 2 HSC Board Question Paper

BOARD QUESTION PAPER: JULY 2023

SECRETARIAL PRACTICE

Time: 3 Hrs. | Max. Marks: 80

Q.1. (A) Select the correct answer from the options given below and rewrite the sentences: [5 Marks]
1. _______ is related to money and money management.
  • (a) Production
  • (b) Marketing
  • (c) Finance
Answer: Finance
2. Debenture holders are _______ of the company.
  • (a) Creditors
  • (b) Owner
  • (c) Suppliers
Answer: Creditors
3. Deposit can be accepted for a minimum of 6 months and maximum for _______ months.
  • (a) 36
  • (b) 03
  • (c) 30
Answer: 36
4. A stock exchange is where stock brokers and traders can buy and sell _______.
  • (a) gold
  • (b) securities
  • (c) goods
Answer: securities
5. In India, Depository Act was passed in _______.
  • (a) 1919
  • (b) 1996
  • (c) 1999
Answer: 1996

Secretarial Practice Board Papers

Q.1. (B) State whether the following statements are True or False: [5 Marks]
1. Working capital stays in the business almost permanently.
Answer: False
2. Equity shareholders enjoy fixed rate of dividend.
Answer: False
3. The member transferring shares is called transferor.
Answer: True
4. Transfer of securities is easier in electronic mode.
Answer: True
5. Money market is the market for the long term funds.
Answer: False
Q.1. (C) Select the correct option from the bracket: [5 Marks]

Bracket options: [Debenture holders, within 30 days, short term loan, Capitalization of Reserve Fund, shares offered to existing employees]

Group ‘A’ Group ‘B’
(a) Public Deposits (1) Short term loan
(b) shares offered to existing employees (2) Employee Stock Option Scheme (ESOS)
(c) No voting rights (3) Debenture holders
(d) Capitalization of Reserve Fund (4) Bonus shares
(e) within 30 days (5) Payment of Dividend
Q.1. (D) Write a word or a term or a phrase which can substitute each of the following statements: [5 Marks]
1. Capital collected by way of issue of equity and preference shares.
Answer: Share Capital
2. Authority which has power to issue debentures.
Answer: Board of Directors
3. Documentary evidence of holding the debentures.
Answer: Debenture Certificate
4. Return on investment on deposit.
Answer: Interest
5. The meeting where final dividend is declared.
Answer: Annual General Meeting (AGM)
Q.2. Explain the following terms / concepts (Any FOUR): [8 Marks]
1. Fixed capital
Fixed capital refers to capital used for acquiring fixed assets like land, buildings, machinery, etc. These assets are used for a longer period of time and are not meant for resale. Fixed capital stays in the business almost permanently.
2. Overdraft
Overdraft is a credit facility granted by a bank to Current Account holders. It allows the account holder to withdraw money in excess of the balance available in the account, up to a specified limit. Interest is charged only on the amount withdrawn.
3. Employees Stock Purchase Scheme (ESPS)
Under this scheme, the company offers its shares to the employees at a discounted price which they can purchase at a future date. The company deducts a certain amount from the salary of the employee towards the payment for the shares.
4. Dematerialization
Dematerialization (Demat) is the process of converting physical share certificates into electronic form. It eliminates the risks associated with physical shares like theft, loss, or mutilation and makes share transfer easier and faster.
5. Primary market
The primary market is also known as the New Issues Market. It is a market where new securities are issued by companies for the first time to the public. It facilitates capital formation directly for the companies.
6. Stock Exchange
A Stock Exchange is a specific place or market where various types of securities (shares, debentures, bonds, etc.) are purchased and sold. It acts as an intermediary between investors and companies, providing liquidity to securities.
Q.3. Study the following cases / situations and express your opinion (Any TWO): [6 Marks]
1. DDS Financial plans to raise ` 10 crores by issuing secured, Non-convertible debentures. However, as per the Articles of Association, the Board of Directors has authority only to raise upto 5 crores. They are also considering whether to go for private placement or make public offer. Please advise them on the following:
  • a. What can be the maximum tenure of the debentures to be issued?
    Answer: Secured non-convertible debentures can be issued for a maximum tenure of 10 years.


  • b. Is the proposed issue within the borrowing powers of the Board?
    Answer: No, the proposed issue of ` 10 crores is beyond the authority of ` 5 crores granted to the Board. They would need approval from shareholders via a special resolution to increase the limit.


  • c. Within what period should company issue Debenture Certificate?
    Answer: The company must issue the Debenture Certificate within 6 months from the date of allotment of debentures.
2. Mrs. Alka wishes to open a Demat account in her name:
  • a. Can she open the account going to Mumbai office of NSDL?
    Answer: No, an investor cannot approach the Depository (NSDL) directly. She must open the account through a Depository Participant (DP).


  • b. Is she required to pay for opening of account and its maintenance?
    Answer: Yes, generally investors are required to pay account opening charges (unless waived by DP) and Annual Maintenance Charges (AMC) to the DP.


  • c. Does she have to send the shares to respective company for demating?
    Answer: Yes (indirectly). She needs to submit the physical share certificates along with the Demat Request Form (DRF) to her DP. The DP then forwards them to the company/Registrar.
3. ABC Co. Ltd. decides to pay Interim Dividend:
  • a. Can it be paid out of free reserves?
    Answer: No, interim dividend cannot be paid out of free reserves. It must be paid out of the surplus in the Profit and Loss account of the current financial year.


  • b. Does the Board have a right of declaring the interim Dividend at the Board Meeting?
    Answer: Yes, the Board of Directors has the power to declare interim dividend between two AGMs.


  • c. Should the company distribute the dividend within 30 days of its declaration?
    Answer: Yes, the dividend must be paid to shareholders within 30 days of its declaration.
Q.4. Distinguish between the following (Any THREE): [12 Marks]
1. Shares vs Debentures
SharesDebentures
Shares represent owned capital of the company.Debentures represent borrowed capital of the company.
Status of holder is Owner.Status of holder is Creditor.
Return is called Dividend.Return is called Interest.
Dividend rate fluctuates with profits.Interest rate is fixed.
Carries voting rights.No voting rights.
2. Transfer of shares vs Transmission of shares
Transfer of SharesTransmission of Shares
Voluntary act of the member.Takes place by operation of law (involuntary).
Done by sale or gift.Happens due to death, insolvency, or lunacy of member.
Consideration (money) is usually involved.No consideration is involved.
Stamp duty is payable.No stamp duty is payable.
3. Money market vs Capital market
Money MarketCapital Market
Market for short term funds (less than 1 year).Market for medium and long term funds (more than 1 year).
Instruments: Treasury Bills, Commercial Paper, etc.Instruments: Shares, Debentures, Bonds.
Risk is low.Risk is high.
Regulated by Central Bank (RBI).Regulated by SEBI.
4. Interim Dividend vs Final Dividend
Interim DividendFinal Dividend
Declared between two AGMs.Declared at the AGM.
Declared by the Board of Directors.Recommended by Board, Declared by Shareholders.
Paid out of current year's profits.Paid out of current profits, past reserves, or moneys from Govt.
Can be cancelled before payment.Once declared, it becomes a debt and cannot be cancelled.
Q.5. Answer in brief (Any TWO): [8 Marks]
1. State the provisions related to issue of Bonus Shares.
  1. Authorization: The issue must be authorized by the Articles of Association.
  2. Recommendation: It must be recommended by the Board of Directors and approved by shareholders.
  3. Sources: Can be issued from Free Reserves, Securities Premium Account, or Capital Redemption Reserve Account.
  4. Fully Paid-up: Bonus shares can only be issued against fully paid-up shares.
  5. No Default: The company should not have defaulted in payment of interest or principal on fixed deposits or debt securities.
2. Explain any four advantages of Depository system to Investors.
  • Elimination of Risk: Risks associated with physical certificates like theft, loss, mutilation, or forgery are eliminated.
  • Easy Transfer: Transfer of shares is quick and requires no stamp duty.
  • Reduced Paperwork: It reduces the huge volume of paperwork involved in transfer and maintenance of records.
  • Quick Settlement: It increases the liquidity of securities as settlement is done quickly (T+1 or T+2 rolling settlement).
  • Automatic Update: Changes in address or bank details recorded with DP are automatically updated with all companies where the investor holds shares.
3. State the functions of SEBI.
  • Protection of Investors: To protect the interest of investors in securities and promote the development of the securities market.
  • Regulation: To regulate the business in stock exchanges and other securities markets.
  • Registration: To register and regulate the working of stockbrokers, sub-brokers, share transfer agents, bankers to an issue, etc.
  • Prohibiting Unfair Practices: To prohibit fraudulent and unfair trade practices relating to securities markets (e.g., Insider Trading).
Q.6. Justify the following statements (Any TWO): [8 Marks]
1. There are various factors affecting the requirement of fixed capital.
Justification:
  • Nature of Business: Manufacturing industries require more fixed capital for plant and machinery compared to trading concerns.
  • Scale of Operations: Large-scale organizations need more fixed capital for larger premises and more equipment.
  • Choice of Technology: Capital-intensive industries using automatic machines require huge fixed capital.
  • Scope of Activity: Companies involved in production, distribution, and marketing need more capital than those doing only one activity.
2. A company can issue only certain types of debentures.
Justification:
  • The Companies Act, 2013 has put restrictions on the types of debentures a company can issue to protect investor interests.
  • A company cannot issue debentures carrying voting rights.
  • Companies are generally restricted from issuing unsecured debentures (all debentures must be secured).
  • Debentures must be redeemable; irredeemable debentures cannot be issued.
3. All companies cannot accept deposits from public.
Justification:
  • According to the Companies Act, 2013, only certain categories of companies are eligible to accept deposits from the public.
  • Private companies can accept deposits only from members, directors, or their relatives, not the general public.
  • Only "Eligible Public Companies" having a net worth of not less than ` 100 crore or turnover of not less than ` 500 crore can accept deposits from the public.
  • This rule ensures only financially sound companies raise money from the public to reduce default risk.
4. Dividend is paid out of profits of the company.
Justification:
  • Dividend is a return on investment paid to owners (shareholders).
  • It represents a share in the distributable profits of the company.
  • The doctrine of "Maintenance of Capital" implies that capital cannot be returned to shareholders in the form of dividends.
  • Therefore, dividends can only be paid out of current year's profits, accumulated profits (reserves), or money provided by the Government for this purpose.
Q.7. Attempt the following (Any TWO): [10 Marks]
1. Write a letter to the shareholder regarding issue of Bonus Shares.

ABC Company Ltd.

Registered Office: 123, M.G. Road, Mumbai - 400 001.

CIN: L12345MH2000PLC123456

Phone: 022-12345678
Ref: ABC/BONUS/2023-24
Date: 15th July 2023
Website: www.abcltd.com

To,
Mr. Vikram Singh,
A-102, Shanti Nagar,
Pune - 411 004.

Subject: Issue of Bonus Shares

Dear Sir,
I am directed by the Board of Directors to inform you that, in accordance with the resolution passed in the Extraordinary General Meeting held on 10th July 2023, shareholders have approved the issue of Bonus Shares in the ratio of 1:1 (One bonus share for every one equity share held).

Details of Bonus Shares allotted to you are as follows:
Folio No. / DP ID No. of Shares held Bonus Ratio Bonus Shares Allotted Total Holding
IN300123 12345678 100 1:1 100 200

The bonus shares have been credited to your Demat account.

Thanking you,
Yours faithfully,
For ABC Company Ltd.

(Signature)
Company Secretary
2. Draft a letter of allotment of debentures.

XYZ Industries Ltd.

Registered Office: Plot No. 45, MIDC, Nagpur - 440 016.

Ref: XYZ/DEB/ALLOT/23
Date: 20th July 2023

To,
Ms. Priya Sharma,
Civil Lines,
Nagpur.

Subject: Allotment of Debentures

Dear Madam,
In response to your application No. 505 dated 1st July 2023, I am directed by the Board of Directors to inform you that you have been allotted 100, 10% Secured Non-Convertible Debentures of ` 100 each.

Details of allotment:
Folio No. No. of Debentures Applied No. of Debentures Allotted Distinctive Nos. Amount Received
D-105 100 100 3001 to 3100 ` 10,000

The Debenture Certificate will be sent to you shortly.

Thanking you,
Yours faithfully,
For XYZ Industries Ltd.

(Signature)
Company Secretary
3. Draft a letter of thanks to the depositor of a company.

Sunshine Ltd.

Registered Office: 21, Business Bay, Pune - 411 001.

Ref: SUN/FD/THANKS/23
Date: 25th July 2023

To,
Mr. Amit Patil,
Kothrud, Pune.

Subject: Letter of thanks for Deposit

Dear Sir,
We are in receipt of your application dated 20th July 2023 along with a Cheque/DD No. 123456 for ` 50,000/- for placement in Fixed Deposit Scheme for a period of 2 years at 9% interest p.a.

We thank you for the trust and confidence shown in our company. The Fixed Deposit Receipt (FDR) No. 4567 is enclosed herewith.

Thanking you,
Yours faithfully,
For Sunshine Ltd.

(Signature)
Company Secretary

Encl: Fixed Deposit Receipt No. 4567
Q.8. Answer the following questions (Any ONE): [8 Marks]
1. What is Debenture? Explain the different types of debentures.
Meaning:
The word 'Debenture' is derived from the Latin word 'debere' which means 'to owe'. A debenture is an instrument issued by a company acknowledging a debt. It constitutes a loan to the company.

Types of Debentures:
  1. Secured Debentures: These debentures are secured by a charge on the assets of the company. If the company fails to repay, debenture holders can sell the assets to recover dues.
  2. Unsecured Debentures: These carry no security. They are treated as unsecured creditors. (Note: Companies Act 2013 prohibits issue of unsecured debentures).
  3. Registered Debentures: The names of holders are recorded in the 'Register of Debenture Holders'. They are transferred via a transfer deed.
  4. Bearer Debentures: The names are not recorded. They are transferred by mere delivery. Interest coupons are attached to the certificate.
  5. Redeemable Debentures: These are repaid by the company at the end of a specific period.
  6. Irredeemable Debentures: These are not repayable during the lifetime of the company, only upon liquidation. (Now prohibited).
  7. Convertible Debentures: Holders have the right to convert their debentures into equity shares after a specific period.
  8. Non-Convertible Debentures (NCD): These cannot be converted into equity shares. They are redeemed on maturity.
2. Explain the classification of share capital.
Classification of Share Capital:
  1. Authorized / Nominal / Registered Capital: This is the maximum amount of capital that a company is authorized to issue as per its Memorandum of Association. Example: ` 10,00,000 (1,00,000 shares of ` 10 each).
  2. Issued Capital: It is that part of Authorized Capital which is offered to the public for subscription. The remaining part is 'Unissued Capital'.
  3. Subscribed Capital: It is that part of Issued Capital which has been actually subscribed (taken up) by the public. If the public subscribes to all issued shares, Subscribed Capital = Issued Capital.
  4. Called-up Capital: It is that part of the subscribed capital which the company has called upon the shareholders to pay. The company may collect money in installments.
  5. Paid-up Capital: It is the total amount of money actually paid by the shareholders. (Paid-up Capital = Called-up Capital - Calls in Arrears).
  6. Reserve Capital: It is that portion of uncalled capital which the company decides to call up only in the event of winding up of the company.
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