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Maharashtra Board HSC Secretarial Practice Question Paper Solution July 2022

Maharashtra Board HSC Secretarial Practice Question Paper Solution July 2022

Board Question Paper : July 2022

Secretarial Practice - Solutions

Question Paper Page No. 1 Question Paper Page No. 2 HSC Secretarial Practice July 2022 Question Paper

Time: 3 Hrs. | Max. Marks: 80

Q.1. (A) Select the proper option from the options given below and rewrite the sentences: [5 Marks]
(1) _______ refers to any kind of fixed assets.

Options: (a) Authorised Capital (b) Issued Capital (c) Fixed Capital

Answer: (c) Fixed Capital refers to any kind of fixed assets.
(2) The holder of bond is _______ of the company.

Options: (a) secretary (b) owner (c) creditor

Answer: The holder of bond is (c) creditor of the company.
(3) _______ protects the interest of debenture holders.

Options: (a) Debenture trustees (b) Debenture holders (c) Redemption reserve

Answer: (a) Debenture trustees protects the interest of debenture holders.
(4) Dividend is recommended by _______.

Options: (a) Board of Directors (b) Shareholders (c) Depositors

Answer: Dividend is recommended by (a) Board of Directors.
(5) Money market is a market for lending and borrowing of funds for _______ term.

Options: (a) short (b) medium (c) long

Answer: Money market is a market for lending and borrowing of funds for (a) short term.

Secretarial Practice Board Papers

Q.1. (B) Write a word / term / phrase which can be substituted for each of the following statements: [5 Marks]
(1) The value of share which is written on the share certificate.
Answer: Face Value
(2) Highest bid price in Book Building Method.
Answer: Cap Price
(3) Company which can accept deposits from public upto 35% of its paid-up share capital and free reserves.
Answer: Eligible Public Company
(4) The shareholders who get dividend at a fluctuating rate.
Answer: Equity Shareholders
(5) The first stock exchange in India to be recognized under the Securities Contracts Regulation Act.
Answer: Bombay Stock Exchange (BSE)
Q.1. (C) State whether the following statements are true or false: [5 Marks]
(1) Fixed capital is also referred as circulating capital.
Answer: False (Fixed capital is permanent capital; Working capital is circulating capital).
(2) Sweat equity shares are offered to directors or employees of a company.
Answer: True.
(3) Payment of interest on debentures does not depend on the profits of the company.
Answer: True.
(4) IEPF is the fund created by company.
Answer: False (IEPF is established by the Central Government).
(5) A stock exchange is a reliable barometer to measure the economic condition of a country.
Answer: True.
Q.1. (D) Select the correct option from the bracket: [5 Marks]

(Retained earnings, funds for long term, charge on assets, At annual general meeting, Creditor of the company)

Completed Table:
Group 'A' Group 'B'
(a) Secured debentures (1) Charge on assets
(b) Retained earnings (2) Accumulated corporate profit
(c) Depositor (3) Creditor of the company
(d) At annual general meeting (4) Final Dividend
(e) Capital Market (5) funds for long term
Q.2. Explain the following terms / concepts (Any FOUR): [8 Marks]
(1) Financial market
A financial market is a market where financial assets such as shares, debentures, bonds, etc., are exchanged. It acts as an intermediary between investors (who have surplus funds) and borrowers (who need funds for investment). It facilitates the mobilization of savings into productive channels.
(2) Final dividend
Final dividend is the dividend that is declared and paid by the company for the complete financial year after the closure of books of accounts. It is recommended by the Board of Directors and approved by the shareholders in the Annual General Meeting.
(3) Deposit receipt
A Deposit Receipt is a document issued by a company to a depositor as evidence of the receipt of money as a deposit. It contains details like the name of the depositor, amount of deposit, rate of interest, and date of repayment. It must be issued within 21 days from the date of receipt of money.
(4) Employees stock option scheme (ESOS)
ESOS is a scheme where a company offers its permanent employees, directors, or officers the option to purchase equity shares of the company at a future date at a pre-determined price. The price is usually lower than the prevailing market price to incentivize employees.
(5) Owned capital
Owned capital refers to the capital raised by a company with the help of owners (shareholders). It is the permanent capital of the company. It consists of Equity shares, Preference shares, and Retained Earnings. It does not create any charge on the assets of the company.
(6) Working capital
Working capital is the capital required for the day-to-day operations of the business. It is also known as circulating capital. It is calculated as Current Assets minus Current Liabilities. It is used for purchasing raw materials, paying wages, and meeting overhead expenses.
Q.3. Study the following case / situation and express your opinion (Any TWO): [6 Marks]
(1) Gold Ltd. Company 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.
Opinion:
  • (a) Is Gold Ltd. Company a listed company?
    Yes, Gold Ltd. is a listed company because it has come out with an FPO (Follow-on Public Offer), which is an issue of shares by an existing listed company to the public.
  • (b) How should the company inform the applicants to whom the company is allotting shares?
    The company should inform the applicants by sending a "Letter of Allotment" (or via SMS/Email in case of electronic mode).
  • (c) 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) GCC 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–
Opinion:
  • (a) What can be the maximum tenure of the debentures to be issued?
    The maximum tenure of secured debentures can be 10 years (or up to 30 years for infrastructure companies).
  • (b) Is the proposed issue within the borrowing powers of the Board?
    No, the proposed issue of ` 10 crores is beyond the borrowing powers of the Board (limit is ` 5 crores). They will need shareholder approval via a Special Resolution.
  • (c) Within what period should the company issue Debenture certificate?
    The company should issue the Debenture certificate within 6 months from the date of allotment of debentures.
(3) Mr “S” holds 50 equity shares of Peculiar Company Ltd. in Demat form. The company has issued Bonus shares in the ratio of 1 : 1 to its shareholders:
Opinion:
  • (a) Will Mr. “S” get Bonus shares in physical or Demat form?
    Mr. "S" will get Bonus shares in Demat form since his existing holding is in Demat form.
  • (b) Who is entitled to Bonus shares: Mr “S” or the Depository (NSDL)?
    Mr. "S" is the Beneficial Owner, so he is entitled to the Bonus shares. The Depository (NSDL) is merely the registered owner on behalf of the investor.
  • (c) Will holding shares in Demat form result in quick transfer of these shares?
    Yes, holding shares in Demat form results in immediate and quick transfer of shares without stamp duty or paperwork.
Q.4. Distinguish between the following (Any THREE): [12 Marks]
(1) Rights shares and Bonus shares.
Point of Difference Rights Shares Bonus Shares
Meaning Shares offered to existing equity shareholders in proportion to their existing holding, usually at a discounted price. Shares issued free of cost to existing equity shareholders out of accumulated profits.
Payment Shareholders have to pay for these shares. Shareholders do not have to pay; they are free of cost.
Purpose Issued to raise fresh capital for the company. Issued to capitalize accumulated profits or reserves.
Renunciation Shareholders can renounce (give up) their rights in favor of others. Shareholders cannot renounce bonus shares.
(2) Dividend and Interest.
Point of Difference Dividend Interest
Meaning It is the return paid to the shareholders for their investment in shares. It is the return paid to creditors (debenture holders, depositors) for the loan provided.
Nature It is an appropriation of profit. It is a charge against profit.
Certainty It is not certain; it is paid only when the company earns profit (except for fixed pref. dividend). It is certain and fixed; it must be paid regardless of profit or loss.
Status It is paid to the owners of the company. It is paid to the creditors of the company.
(3) Transfer of shares and Transmission of shares.
Point of Difference Transfer of Shares Transmission of Shares
Meaning Voluntary passing of property in shares from one person to another by contract. Passing of title of shares by operation of law due to death, insolvency, or insanity.
Nature It is a voluntary act of the shareholder. It is an involuntary action (automatic process of law).
Consideration Usually involves monetary consideration (sale). No monetary consideration is involved.
Stamp Duty Stamp duty is payable on the transfer deed. No stamp duty is payable.
(4) Primary market and Secondary market.
Point of Difference Primary Market Secondary Market
Meaning Market where new securities are issued by companies for the first time. Market where existing securities are bought and sold.
Also known as New Issue Market. Stock Exchange.
Price Determination Prices are determined by the management of the company. Prices are determined by forces of demand and supply.
Parties involved Company and Investors. Investors and Investors (buying and selling among themselves).
Q.5. Answer in brief (Any TWO): [8 Marks]
(1) State the provisions for Rights Issue.

The provisions for Rights Issue are as follows:

  • Priority: Rights shares must be offered to existing equity shareholders first.
  • Ratio: They are offered in proportion to the paid-up share capital held by shareholders at the time of the issue.
  • Letter of Offer: The company must send a 'Letter of Offer' to the shareholders.
  • Time Limit: The offer must be open for a minimum of 15 days and a maximum of 30 days.
  • Right to Renounce: Shareholders have the right to accept, reject, or renounce the offer in favor of another person.
  • Price: The price of rights shares is usually less than the market price.
(2) State any four factors affecting fixed capital requirement.

Factors affecting fixed capital requirement include:

  1. Nature of Business: Manufacturing and public utility companies need huge fixed capital for plant and machinery, whereas trading concerns need less.
  2. Size of Business: Large-scale operations require higher investment in fixed assets compared to small-scale businesses.
  3. Scope of Business: Firms involved in complete production processes need more fixed capital than those that only assemble parts.
  4. Mode of Acquisition: If assets are purchased, more capital is needed. If assets are leased or rented, fixed capital requirement is lower.
  5. Future Growth: Companies planning expansion or diversification need more fixed capital.
(3) Explain four advantages of depository system to the company.

The advantages of the depository system to the company are:

  1. Up-to-date Records: The company gets updated information about shareholders and their holdings from the depository, aiding in better communication.
  2. Cost Saving: The company saves costs on printing certificates, postage, and handling transfer documents.
  3. No Stamp Duty: The company does not need to handle stamp duty payments on transfers.
  4. Faster Distribution: Distribution of dividends and bonus shares becomes quicker and easier through electronic credits.
  5. Reduced Workload: The administrative workload of the secretarial department regarding share transfers and transmission is significantly reduced.
Q.6. Justify the following statements (Any TWO): [8 Marks]
(1) Depository provides easy and quicker transfer of shares.
Justification:
  • In the depository system, shares are held in electronic (dematerialized) form.
  • There is no need for physical handling of share certificates or filling out transfer deeds.
  • Transfer of shares is effected electronically by passing entries in the accounts of the buyer and seller.
  • There is no stamp duty involved, and the process is immediate, eliminating postal delays or bad deliveries.
  • Therefore, the depository system makes the transfer process very easy and quick.
(2) Stock exchanges work for the growth of the Indian economy.
Justification:
  • Stock exchanges mobilize the savings of the public and channel them into productive industries.
  • They provide liquidity to investments, encouraging people to invest in industrial securities.
  • This capital formation helps companies expand, leading to industrialization and economic growth.
  • Stock exchanges also reflect the economic health of the country and attract foreign investment (FIIs/FDIs).
  • By facilitating capital allocation to efficient companies, they contribute directly to the GDP and economic development of India.
(3) Interest is a liability / obligation of the company.
Justification:
  • Interest is the cost of borrowing funds (debt capital) such as debentures, bonds, or deposits.
  • It is a contractual obligation that the company must fulfill regardless of its financial performance.
  • Interest is a "charge against profit," meaning it must be paid even if the company incurs a loss.
  • Failure to pay interest can lead to legal action by creditors and may force the liquidation of the company.
  • Therefore, payment of interest is a strict liability or obligation of the company.
(4) Equity share capital is risk capital.
Justification:
  • Equity shareholders are the ultimate owners but also the primary risk bearers of the company.
  • They do not get a fixed rate of dividend; dividend depends on profits. In years of loss, they may get no dividend.
  • In the event of winding up, equity capital is repaid last, only after all creditors and preference shareholders are paid.
  • If the assets are insufficient to pay creditors, equity shareholders may lose their entire investment.
  • Since their return and principal repayment are uncertain, equity share capital is rightly called risk capital.
Q.7. Attempt the following (Any TWO): [10 Marks]
(1) Write a letter to the member for the issue of share certificate.

ABC LIMITED

Registered Office: 123, Nariman Point, Mumbai - 400 021.

Phone: 022-24567890
Ref No: S/105/2022
Date: 15th July, 2022
Website: www.abcltd.com

To,
Mr. Rohan Sharma,
A-12, Green Park,
Pune - 411 004.

Subject: Issue of Share Certificate

Dear Sir,

This is to inform you that your request for a Share Certificate has been approved by the Board of Directors. In accordance with your application No. 5044, the company is pleased to issue the Share Certificate for the equity shares allotted to you.

The details of the Share Certificate are as follows:

Folio No. Certificate No. Distinctive Nos. From - To No. of Shares
R-102 4501 3001 - 3100 100

Please acknowledge the receipt of the same.

Thanking you,

Yours faithfully,
For ABC Limited

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

SUNRISE INDUSTRIES LTD.

Registered Office: 45, MIDC, Nagpur - 440 016.

Phone: 0712-2345678
Ref No: D/Allot/2022
Date: 20th July, 2022

To,
Ms. Priya Desai,
Laxmi Nagar,
Nagpur.

Subject: Allotment of Debentures

Dear Madam,

In response to your application No. D-203 dated 1st July 2022, I am directed by the Board of Directors to inform you that you have been allotted 100, 10% Secured Non-Convertible Debentures of Rs. 100/- each. The tenure of debentures is 5 years.

The details of allotment are as follows:

Folio No. No. of Debentures Applied No. of Debentures Allotted Distinctive Nos. Amount Received (Rs.)
D-505 100 100 5001 - 5100 10,000

The Debenture Certificate will be sent to you shortly.

Thanking you,

Yours faithfully,
For Sunrise Industries Ltd.

(Signature)
Company Secretary
(3) Draft a letter to depositor informing him about payment of interest through Interest Warrant.

OMEGA TRADERS LTD.

Registered Office: Plot 10, Bandra (E), Mumbai - 400 051.

Phone: 022-26541234
Ref No: Dep/Int/2022
Date: 25th July, 2022

To,
Mr. Suresh Patil,
Thane (W).

Subject: Payment of Interest on Fixed Deposit

Dear Sir,

I am instructed by the Board of Directors to inform you that interest on your Fixed Deposit @ 10% p.a. has become due. We are enclosing herewith an Interest Warrant No. 3456 dated 25th July 2022 drawn on Axis Bank, Bandra Branch, for Rs. 2,000/-.

Details of the deposit and interest are given below:

FDR No. Deposit Amount Rate of Int. Gross Interest TDS Net Amount
F-1234 Rs. 20,000 10% Rs. 2,000 Nil Rs. 2,000

Please detach the Interest Warrant along the perforated line.

Thanking you,

Yours faithfully,
For Omega Traders Ltd.

(Signature)
Company Secretary

Encl: Interest Warrant No. 3456

Q.8. Answer the following question (Any ONE): [8 Marks]
(1) What is an equity share? Explain its features.

Meaning of Equity Share:
Equity shares are those shares which are not preference shares. They are the fundamental source of financing business activities. Equity shareholders own the company and bear the ultimate risk associated with ownership. They are also known as 'Ordinary Shares'.

Features of Equity Shares:

  1. Permanent Capital: Equity shares are irredeemable. The amount received from equity shares is not refunded by the company during its lifetime. It is refunded only in the event of winding up of the company.
  2. Fluctuating Dividend: Equity shares do not have a fixed rate of dividend. The rate of dividend depends upon the profit earned by the company. If the profit is higher, the dividend is higher; if profit is low, the dividend is low or nil.
  3. Rights: Equity shareholders enjoy certain rights:
    • Right to Vote: They can vote in meetings and elect directors.
    • Right to Share in Profit: They have a right to share in the profit as dividends.
    • Right to Inspect Books: They can inspect statutory books of the company.
  4. No Preferential Right: Equity shareholders do not have a preferential right for payment of dividend or repayment of capital. They are paid only after preference shareholders are paid.
  5. Controlling Power: Since equity shareholders have voting rights, they control the management of the company. They are described as the 'real masters' of the company.
  6. Risk: Equity shareholders are the shock absorbers of the company. If the company fails, they lose their capital. Hence, it is called 'Risk Capital'.
  7. Residual Claimant: Equity shareholders are the owners of the residue earnings and assets. They get whatever is left after paying all other claims.
  8. Bonus Issue: Bonus shares are issued as a gift to existing equity shareholders out of accumulated profits.
  9. Rights Issue: When a company raises further capital, existing equity shareholders are given priority to buy new shares (Rights Issue).
(2) Explain the procedure for issue of debentures.

The procedure for the issue of debentures involves the following steps:

  1. Pass Resolution in Board Meeting: The Board of Directors must pass a resolution regarding the amount, type of debentures, terms of issue, and call for an EGM (Extraordinary General Meeting) if the borrowing limit exceeds powers.
  2. Extraordinary General Meeting (EGM): If the borrowing exceeds the limit of paid-up capital and free reserves, the shareholders' approval is required through a Special Resolution in EGM.
  3. Filing with Registrar of Companies (ROC): The company must file the special resolution and a copy of the prospectus or statement in lieu of prospectus with the ROC.
  4. Credit Rating: The company must obtain a credit rating from one or more credit rating agencies (like CRISIL, CARE). The rating must be mentioned in the offer document.
  5. Enter into Underwriting Agreement: If needed, the company enters into an agreement with underwriters to ensure the subscription of the issue.
  6. Appointment of Debenture Trustees: If the company issues a prospectus to more than 500 people, it must appoint Debenture Trustees to protect the interest of debenture holders.
  7. Issue of Prospectus / Letter of Offer: The company issues the prospectus to the public inviting them to subscribe to the debentures.
  8. Open Separate Bank Account: A separate bank account is opened in a scheduled bank to receive the application money.
  9. Receiving Application Money: Applicants submit the application form along with the money to the bank within the specified time.
  10. Board Meeting for Allotment: After the subscription list closes, a Board Meeting is held to decide the allotment of debentures. A resolution for allotment is passed.
  11. Issue of Debenture Certificates: The certificates must be issued within 6 months from the date of allotment.
  12. Making Entries in Register of Debenture Holders: The Secretary records the details of the allotment in the Register of Debenture Holders within 7 days of the Board approval.
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