Secretarial Practice (52) - HSC Board Exam 2025 Solution
(1) The holder of bond is _____ of the company.
(2) Company has to appoint _____ to protect the interest of depositors.
(3) The rate of interest payable on debenture is _____.
(4) Demat shares are_____ .
(5) Central government is a borrower in the money market through the issue of _______.
(1) Depository Receipt traded in USA is called as Global Depository Receipt.
(2) FPO refers to offering of shares to the public for the first time.
(3) Bonus shares are issued as a free gift to the Preference Shareholders.
(4) Dividend is an obligation to be paid by a company every year.
(5) A stock market is an important constituent of money market.
Secretarial Practice Board Papers
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| Group ‘A’ | Group ‘B’ (Answer) |
|---|---|
| (a) Financial Market | (4) Trading of financial securities |
| (b) Equity Share Capital | (5) Risk capital |
| (c) Charge on Assets | (1) Secured debentures |
| (d) Depository Act | (2) 1996 |
| (e) Capital Structure | (3) Mix up of various sources of funds |
(1) Dividend once declared cannot be revoked.
(2) Authorized capital is mentioned in capital clause of Memorandum of Association.
(3) Fixed capital is also referred as circulating capital.
(4) Depositors are given voting rights.
(5) Bombay Stock Exchange (BSE) is the oldest stock exchange in India.
(1) Fixed capital
(2) Overdraft
(3) Debenture certificate
(4) Secured Deposit
(5) Rematerialization
(6) Bull
(1) STAR Company Ltd. has recently come out with its public offer through FPO. Their issue was oversubscribed. The Board of Directors now wants to start the allotment process. Please advise the Board on:
- Should the company set up allotment committee?
Yes, if the allotment is large, the Board usually appoints an Allotment Committee to handle the allotment procedure. - How should the company inform the applicants to whom the company is alloting shares?
The company should inform them by sending a "Letter of Allotment" (or Allotment Advice in case of Demat). - Within what period should the company issue share certificate?
The company must issue share certificates within two months from the date of allotment of shares.
(2) Mr. Z holds 50 shares of Peculiar Company Ltd. in physical mode and wishes to convert the same into electronic mode.
- Mr. Z holds a Saving Bank Account with CFDH Bank Ltd. Can he deposit his shares into this account for demat?
No, he cannot deposit shares into a Saving Bank Account. He needs a Demat account for holding electronic shares. - What type of account is needed for the same?
A 'Demat Account' (Beneficiary Owner Account) is needed with a Depository Participant (DP). - Is it the RBI which will be the custodian of shares of Mr. Z after demating?
No, the Depository (such as NSDL or CDSL) acts as the custodian of the electronic shares, not the RBI.
(3) XYZ Company Ltd. decides to declare dividend for the financial year 2021-22 in which it has earned profits less than their expectations.
- Is Board right in recommending a dividend of ₹ 5/- per share out of free reserves?
Yes, if profits are inadequate, the Board can recommend dividend out of free reserves, subject to fulfillment of conditions prescribed by law. - Can Board declare the dividend though it is not approved by Annual General Meeting?
No, the final dividend must be approved by the shareholders at the Annual General Meeting (AGM). The Board only recommends it. - Can the Board give dividend in the form of gifts?
No, dividend must be paid in cash (cheque, warrant, or electronic transfer). It cannot be paid in kind (gifts).
(1) Shares and Debentures
| Shares | Debentures |
|---|---|
| Represents ownership capital of the company. | Represents borrowed capital (debt) of the company. |
| Holders are owners of the company. | Holders are creditors of the company. |
| Return on investment is called Dividend. | Return on investment is called Interest. |
| Shareholders have voting rights. | Debenture holders do not have voting rights. |
(2) Transfer of shares and Transmission of shares
| Transfer of Shares | Transmission of Shares |
|---|---|
| It is a voluntary act of the shareholder. | It takes place by operation of law (involuntary). |
| Occurs when a member wants to sell or gift shares. | Occurs due to death, insolvency, or insanity of the member. |
| Consideration (money) is usually involved. | No consideration is involved. |
| Stamp duty is payable. | No stamp duty is payable. |
(3) Final Dividend and Interim Dividend
| Final Dividend | Interim Dividend |
|---|---|
| Declared at the Annual General Meeting (AGM). | Declared by the Board of Directors between two AGMs. |
| It is declared after the close of the financial year. | It is declared before the finalization of accounts for the year. |
| Declared only after recommendation by the Board and approval by shareholders. | The Board has the power to declare it; shareholder approval is not needed at the time of declaration. |
| Cannot be revoked once declared. | Can be revoked by the Board before payment. |
(4) Primary Market and Secondary Market
| Primary Market | Secondary Market |
|---|---|
| Market for new securities (New Issue Market). | Market for existing/old securities (Stock Exchange). |
| Securities are issued by the company directly to investors. | Securities are traded between investors. |
| Prices are fixed by the company. | Prices are determined by demand and supply forces. |
| Example: IPO, FPO. | Example: Trading on BSE, NSE. |
(1) State the provisions relating to Bonus Shares.
- Authorization: The issue must be authorized by the Articles of Association.
- Recommendation: The Board of Directors must recommend the issue, and shareholders must approve it.
- Sources: Can be issued out of Free Reserves, Securities Premium Account, or Capital Redemption Reserve Account.
- No Default: The company should not have defaulted in payment of interest or principal on debt or statutory dues (PF, Gratuity).
- Fully Paid: Bonus shares can only be issued against fully paid-up existing shares.
- No Dividend in lieu: Bonus shares cannot be issued in lieu of dividend.
(2) Explain the features of Interest.
- Price for Capital: Interest is the cost or price paid for the use of borrowed capital.
- Fixed Rate: It is usually paid at a fixed rate agreed upon at the time of borrowing.
- Obligation: It is a mandatory payment. It must be paid irrespective of whether the company makes a profit or suffers a loss.
- Charge against Profit: Interest is treated as an expense and is tax-deductible for the company.
- Creditors: It is paid to creditors like debenture holders, depositors, or banks.
(3) Explain any four features of Stock Exchange.
- Market for Securities: It is a place where securities issued by companies, government, and semi-government bodies are bought and sold.
- Organized Market: It operates according to specific rules and regulations (SEBI guidelines).
- Dealings in Listed Securities: Only those securities that are listed on the stock exchange can be traded.
- Specific Location: It is a physical or digital marketplace where brokers and traders meet to conduct business (e.g., BSE in Mumbai).
- Members Only: Trading can only be done through authorized members (brokers).
(1) The firm has multiple choices of sources of financing.
Justification:
- A firm requires capital for different purposes (long-term, medium-term, short-term).
- It can raise owned capital through Equity Shares, Preference Shares, or Retained Earnings.
- It can raise borrowed capital through Debentures, Bonds, Public Deposits, or Bank Loans.
- Different sources have different costs, risks, and legal requirements, giving the firm flexibility to choose the best mix (Capital Structure) based on its needs.
(2) A company can issue only certain types of debentures.
Justification:
- As per the Companies Act, 2013, a company cannot issue debentures with voting rights.
- A company generally issues secured debentures to protect investors' interests.
- Debentures must be redeemable; a company cannot issue irredeemable debentures.
- Convertible debentures can only be issued if approved by a special resolution.
- These restrictions ensure the protection of investors and compliance with the law.
(3) Company has to fulfill certain provisions relating to issue of circular or advertisement.
Justification:
- When inviting deposits from the public or members, a company must issue a circular or advertisement.
- It must contain details like the financial position of the company, credit rating, details of the scheme, etc.
- A copy must be filed with the Registrar of Companies (ROC).
- It must be issued in the name of the Board of Directors.
- This ensures transparency and helps investors make informed decisions.
(4) ISIN is a necessary component of Demat.
Justification:
- ISIN stands for International Securities Identification Number.
- It is a unique 12-digit alphanumeric code assigned to a specific security (e.g., equity shares of a specific company).
- In the Depository system, securities are identified by their ISIN, not by certificate numbers.
- It ensures standardization and avoids confusion between different securities of the same or different companies during electronic trading and settlement.
(1) Write a letter to depositor regarding renewal of his deposit.
Mr. Ajay Kumar,
15, Shivaji Park,
Mumbai - 400028
We received your application dated 10th Feb 2025 for the renewal of your fixed deposit. We are pleased to inform you that the Board of Directors has approved the renewal of your deposit for a further period of one year.
The details of the renewed deposit are as follows:
| Original FDR No. | New FDR No. | Amount (₹) | Period | Rate of Interest |
|---|---|---|---|---|
| FD-5001 | FD-6055 | 25,000 | 1 Year | 9% p.a. |
The new Fixed Deposit Receipt (FDR) is enclosed herewith. Thank you for your continued trust in our company.
For Star Industries Ltd.
Sd/-
Company Secretary
(2) Write a letter to the debenture holder informing him/her about conversion of debentures into equity shares.
Ms. Priya Sharma,
A-4, Green Valley,
Thane - 400601
I am directed to inform you that in accordance with the terms of issue of Convertible Debentures and the resolution passed at the Extraordinary General Meeting held on 10th Feb 2025, your 100 10% Convertible Debentures have been converted into Equity Shares.
Details of allotment are as follows:
| Folio No. | No. of Debentures Held | No. of Equity Shares Allotted | Distinctive Nos. | Share Cert. No. |
|---|---|---|---|---|
| D-201 | 100 | 10 | 3001 to 3010 | S-505 |
The Share Certificate is enclosed herewith. Your Debenture Certificate stands cancelled.
For Omega Limited
Sd/-
Company Secretary
(3) Write a letter to the member for the payment of dividend through dividend warrant.
Mr. Rajesh Patil,
Plot 12, Gangapur Road,
Nashik - 422005
We are pleased to inform you that the Board of Directors recommended a dividend of ₹ 2/- per share, which was approved at the Annual General Meeting held on 15th Feb 2025.
The details of dividend payable to you are as follows:
| Folio No. | No. of Shares | Dividend per Share | Total Dividend Amount (₹) | Warrant No. |
|---|---|---|---|---|
| S-1002 | 500 | ₹ 2/- | 1,000/- | DW-9988 |
The Dividend Warrant is attached herewith. Please detach it and deposit it in your bank.
For Sunrise Motors Ltd.
Sd/-
Company Secretary
(1) What are Preference Shares? Explain the different types of Preference Shares.
Definition: Preference shares are those shares which have certain preferential rights over equity shares. Specifically:
1. Preferential right to receive dividend at a fixed rate before equity shareholders.
2. Preferential right to repayment of capital in the event of winding up of the company.
Types of Preference Shares:
- Cumulative Preference Shares: If dividend is not paid in any year due to loss, the arrears accumulate and are paid in future years before any dividend is paid to equity shareholders.
- Non-Cumulative Preference Shares: Dividend is paid only if there is profit in that specific year. Arrears do not accumulate. If missed, it is lost forever.
- Participating Preference Shares: Holders get the fixed dividend and also have a right to participate in the surplus profit remaining after paying dividend to equity shareholders.
- Non-Participating Preference Shares: They get only the fixed rate of dividend and do not share in surplus profits. (Default type).
- Convertible Preference Shares: These shares can be converted into equity shares after a specific period.
- Non-Convertible Preference Shares: These cannot be converted into equity shares.
- Redeemable Preference Shares: These shares are repaid (redeemed) by the company after a fixed period as per the articles of association.
- Irredeemable Preference Shares: These are not repaid during the lifetime of the company (repaid only at winding up). (Note: As per Companies Act 2013, companies cannot issue irredeemable preference shares).
(2) Explain the procedure for allotment of shares.
The procedure for allotment of shares involves the following steps:
- Appointment of Allotment Committee: If the subscription is huge, the Board appoints a committee to decide the basis of allotment.
- Board Meeting for Allotment: A Board meeting is held to approve the allotment formula and pass a resolution for allotting shares.
- Collection of Allotment Money: (If applicable) The company instructs the bank to collect allotment money from applicants.
- Arrangement of Application Money: The application money received is transferred to the Share Capital Account.
- Letter of Allotment / Regret:
- Letter of Allotment: Sent to applicants to whom shares are allotted.
- Letter of Regret: Sent to applicants to whom no shares are allotted (along with refund).
- Filing Return of Allotment: The company must file a 'Return of Allotment' with the Registrar of Companies (ROC) within 30 days containing details of allotment.
- Issue of Share Certificates: The company issues share certificates to the allottees within 2 months of allotment (in case of physical shares) or credits the Demat account.
- Register of Members: The Secretary enters the names of the allottees in the Register of Members.