(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.
- Finance is the management of _____ affairs of the company.
Answer: Finance is the management of (a) monetary affairs of the company.
- Company can accept deposits from public, minimum for _____ months.
Answer: Company can accept deposits from public, minimum for (b) six months.
- A company can issue _____ convertible debentures.
Answer: A company can issue (c) partly or fully convertible debentures.
- Debenture capital is a _____ capital of a company.
Answer: Debenture capital is a (a) borrowed capital of a company.
- _____ is a return paid to creditors by the company.
Answer: (b) Interest is a return paid to creditors by the company.
| Group 'A' | Answer Options | Group 'B' (Correct Solution) |
|---|---|---|
| (a) Capital budgeting | (3) | Investment decision |
| (b) Regret Letter | (10) | Non-Allotment of shares |
| (c) Board of Directors | (9) | Power to issue debentures |
| (d) Depository Act | (8) | 1996 |
| (e) Final Dividend | (7) | Decided by Board and declared by members |
Secretarial Practice Board Papers
- S.P. - March 2025 - English Medium View Answer Key
- S.P. - March 2025 - Marathi Medium View Answer Key
- S.P. - March 2025 - HIndi Medium View Answer Key
- S.P. - March 2024 - English Medium View Answer Key
- S.P. - March 2024 - Marathi Medium Download QP Answer Key Answer Key
- S.P. - March 2024 - Hindi Medium View Answer Key
- S.P. - March 2022 View
- S.P. - March 2014 View
- S.P. - October 2014 View
- S.P. - March 2015 View
- S.P. - July 2015 View
- S.P. - March 2016 View
- S.P. - July 2016 View
- S.P. - March 2017 View
- S.P. - July 2017 View
- S.P. - March 2018 View
- S.P. - July 2018 View
- S.P. - February 2019 View
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Debenture, Public Deposit, Retained earnings
Answer: Retained earnings (It is owned capital, others are borrowed capital). -
Bonus shares, Rights shares, Employees Stock Option Scheme (ESOS)
Answer: Employees Stock Option Scheme (ESOS) (Given to employees, whereas Bonus and Rights are typically associated with existing equity shareholders. Alternatively, Bonus is free, others are paid). -
Private company, Non-Eligible public company, Government company
Answer: Private company (Generally restricted from inviting public deposits compared to public/government companies). -
Depository, D.P., RBI
Answer: RBI (Depository and DP are constituents of the Depository system; RBI is the central bank). -
Private Placement, Commercial Paper, Further Public Offer (FPO)
Answer: Commercial Paper (It is a money market instrument/debt, whereas Private Placement and FPO are methods of issuing shares/capital).
- Owned capital is temporary capital.
Answer: Owned capital is permanent capital.
- FPO refers to offering of shares to the public for the first time.
Answer: IPO refers to offering of shares to the public for the first time.
- Dividend is recommended by shareholders.
Answer: Dividend is recommended by Board of Directors.
- Deposit is a long term source of capital.
Answer: Deposit is a short term source of capital.
- A stock market is an important constituent of money market.
Answer: A stock market is an important constituent of capital market.
Explain the following terms / concepts (Any FOUR) : [8 Marks]
Definition: Fixed capital refers to capital used for acquiring fixed assets which are used for a longer period of time in the business.
Explanation: These assets are not meant for resale. Examples include land, building, plant, and machinery. It stays in the business almost permanently.
Definition: Borrowed capital is the fund raised by a company from creditors for a specific period.
Explanation: It is also known as debt capital. The company pays interest on this capital. It includes debentures, deposits, bonds, and loans from banks.
Definition: Bonus shares are fully paid shares issued free of cost to the existing equity shareholders of a company.
Explanation: They are issued out of accumulated profits or reserves. It is a capitalization of reserves. Shareholders do not pay anything for these shares.
Definition: A depository system is a system wherein securities (shares, debentures, etc.) are held in electronic mode.
Explanation: It eliminates the problems of physical certificates like theft, loss, or delay. In India, NSDL and CDSL are the depositories.
Definition: The secondary market is a market where existing securities are bought and sold.
Explanation: It is commonly known as the Stock Exchange. It provides liquidity to investors by allowing them to sell their holdings.
Definition: A stock exchange is a specific place where trading of securities takes place.
Explanation: It is an organized market for the purchase and sale of corporate and other securities. Examples: Bombay Stock Exchange (BSE), National Stock Exchange (NSE).
Study the following case / situation and express your opinion (Any TWO) : [6 Marks]
(a) Can they issue convertible debentures?
Yes, Violet Ltd. can issue convertible debentures. However, such issue must be approved by a special resolution passed by the shareholders in a general meeting.
(b) As the company is offering debentures to its members, can such debentures have normal voting rights?
No. According to the Companies Act, 2013, a company cannot issue debentures with voting rights. Debenture holders are creditors, not owners.
(c) Capital raised by issuing debentures will be Owned Capital or Borrowed Capital?
The capital raised by issuing debentures will be treated as Borrowed Capital (Debt Capital).
(a) Mr. Satish holds a Savings Bank Account with SBI. Can he deposit his shares in this account for demat?
No, Mr. Satish cannot use a Savings Bank Account for dematerialization. He must open a specific Demat Account.
(b) What type of account is needed for the same?
A 'Demat Account' (Dematerialized Account) with a Depository Participant (DP) is needed.
(c) Is it the RBI which will be the custodian of shares of Mr. Satish after demating?
No. The Depository (NSDL or CDSL) acts as the custodian of shares in the electronic system, not the RBI.
(a) Is company under default, if dividend was not paid within 30 days of its declaration?
Yes, the company is under default if the dividend is not paid or warrants are not posted within 30 days of declaration.
(b) Is company right in transferring the unpaid dividend to its Debenture Reserve Account?
No. Unpaid dividend must be transferred to a special account called "Unpaid Dividend Account" opened in a scheduled bank, not the Debenture Reserve Account.
(c) Does the company have to transfer the amount of unpaid dividend to IEPF after 30 days?
No. After 30 days, it goes to the "Unpaid Dividend Account". The transfer to IEPF (Investor Education and Protection Fund) happens only if the money remains unclaimed in the Unpaid Dividend Account for 7 years.
Distinguish between the following (Any THREE) : [12 Marks]
| Point of Difference | Fixed Capital | Working Capital |
|---|---|---|
| Meaning | Capital used to acquire fixed assets which are used for a longer period. | Capital used to carry out day-to-day business operations. |
| Nature | It stays in the business almost permanently. | It is circulating capital; it keeps changing its form. |
| Purpose | Invested in assets like land, building, machinery. | Invested in short-term assets like inventory, cash, receivables. |
| Source | Shares, Debentures, Long-term loans. | Short-term loans, Trade credit, Public deposits. |
| Point of Difference | Rights Shares | Bonus Shares |
|---|---|---|
| Meaning | Shares offered to existing equity shareholders in proportion to their 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 get these shares free of cost. |
| Purpose | To raise fresh capital for the company. | To capitalize accumulated profits/reserves. |
| Renunciation | Shareholders can renounce (give up) their rights in favor of others. | Shareholders cannot renounce bonus shares. |
| Point of Difference | Dematerialization (Demat) | Rematerialization (Remat) |
|---|---|---|
| Meaning | Process of converting physical certificates into electronic form. | Process of converting electronic holdings back into physical certificates. |
| Sequence | It is the initial process to enter the depository system. | It is a reverse process of Demat. |
| Form | Paper to Electronic. | Electronic to Paper. |
| Identification | Securities have no distinctive numbers (fungible). | Certificates have distinctive numbers. |
| Point of Difference | Dividend | Interest |
|---|---|---|
| Meaning | Return on investment paid to the owners (shareholders). | Return on capital paid to the creditors (debenture holders/depositors). |
| Nature | It is an appropriation of profit. | It is a charge against profit. |
| Payment Obligation | Paid only when the company makes a profit and declares it. | Must be paid regardless of whether the company makes a profit or loss. |
| Rate | Fluctuating (for Equity Shares). | Fixed. |
Answer in brief (Any TWO) : [8 Marks]
Meaning: ESOS is a scheme where a company encourages employee participation in the business by offering equity shares to them.
Key Features:
- The company offers shares to permanent employees, Directors, or Officers.
- The shares are offered at a price lower than the market price.
- There is a minimum vesting period of one year.
- Employees cannot sell these shares for a specific 'Lock-in period' (minimum 1 year).
- It helps to retain good employees and creates a sense of belonging.
1. Tenure of Deposit: A company can accept deposits for a minimum of 6 months and a maximum of 36 months.
2. Amount of Deposit: A private company can accept up to 100% of its paid-up capital and free reserves. Public companies have different limits based on eligibility.
3. Interest Rate: The rate of interest cannot exceed the maximum rate prescribed by the RBI/Government. It is currently capped.
4. No Voting Rights: Depositors are creditors of the company. They do not enjoy any voting rights at the company meetings.
Meaning: Interim dividend is the dividend declared by the Board of Directors between two Annual General Meetings (AGMs).
Features:
- Authority: It is decided and declared by the Board of Directors.
- Articles: The Articles of Association must authorize the Board to declare it.
- Source: It is usually paid out of the profits of the current accounting year.
- Ratification: Though declared by the Board, it is often regularized/noted at the subsequent AGM.
- Timing: It is declared before the final accounts are prepared.
Justify the following statements (Any TWO) : [8 Marks]
Justification:
- A bond represents a debt or a loan taken by the company.
- The money provided by the bondholder is treated as 'Borrowed Capital'.
- The bondholder gets interest at a fixed rate, which is a charge on profits.
- They have priority in repayment of principal amount over shareholders during winding up.
- Since they provide loan capital and do not have ownership rights or voting rights, they are creditors.
Justification:
- Secured debentures are those which are backed by some security.
- To protect the interest of debenture holders, the company creates a 'charge' (mortgage/lien) on its assets.
- If the company fails to pay interest or repay the principal, the debenture holders can sell these charged assets to recover their dues.
- According to the Companies Act, 2013, secured debentures must be secured by the creation of a charge on the assets of the company.
Justification:
- The capital market provides long-term funds required by the corporate sector for modernization, expansion, and establishment.
- It allows companies to raise capital through shares and debentures.
- It provides a platform for the valuation of securities (via stock exchanges).
- It enhances the marketability and liquidity of corporate securities, making them attractive to investors.
Justification:
- Stock exchanges mobilize savings of the public and channel them into productive industries.
- It aids in capital formation, which is essential for economic growth.
- It helps the government raise funds through securities for development projects.
- It reflects the economic health of the country (acting as an economic barometer).
- It encourages better allocation of resources to profitable industries.
Attempt the following (Any TWO) : [10 Marks]
CIN: L12345MH2000PLC123456
Fax: 020-23456790
Ref No: SIL/Div/2023-24/101
Email: sun@sunrise.com
Date: 15th May, 2024
Mr. Amit Kumar,
A/12, Galaxy Apts,
M.G. Road, Pune.
I am instructed by the Board of Directors to inform you that the Board has declared a Final Dividend @ ₹ 2.50 per share (25%) on Equity Shares of ₹ 10 each for the financial year ending 31st March, 2024.
This was approved in the Annual General Meeting held on 10th May, 2024. Your Dividend Warrant is enclosed herewith.
Details of Dividend Payment:
| Reg. Folio No. | No. of Shares | Distinctive Nos. | Dividend Amount (₹) | Warrant No. |
|---|---|---|---|---|
| A-105 | 100 | 301 to 400 | 250.00 | DW-8899 |
Please acknowledge the receipt.
Thanking you,
For Sunrise Industries Ltd.
(Signature)
Company Secretary
Ref: NCL/Deb-Int/24/505
Ms. Priya Sharma,
B-202, Sea View,
Mumbai.
We are pleased to inform you that the Board of Directors has approved the payment of interest on 10% Non-Convertible Debentures of ₹ 100 each for the year ended 31st March, 2024.
As per your instruction, the interest amount has been remitted electronically to your bank account via ECS/NEFT.
Details of Interest Payment:
| Folio No. | No. of Debentures | Gross Interest (₹) | TDS (₹) | Net Amount (₹) |
|---|---|---|---|---|
| D-550 | 200 | 2,000 | Nil | 2,000 |
Bank Details: HDFC Bank, Worli Branch. A/c No: XXXXXX1234.
Thanking you,
For Nova Corporation Ltd.
(Signature)
Company Secretary
Mr. Suresh Rao,
15, Civil Lines,
Nagpur.
We received your application dated 10th July, 2024 for the renewal of your Fixed Deposit Receipt No. 4567. The Board of Directors has approved the renewal of your deposit for a further period of 2 years.
The details of the renewed deposit are as follows:
| Old FDR No. | New FDR No. | Amount (₹) | Period | Rate of Interest | Maturity Date |
|---|---|---|---|---|---|
| 4567 | 9901 | 50,000 | 2 Years | 9% p.a. | 20th July, 2026 |
The new Fixed Deposit Receipt (FDR) No. 9901 is enclosed herewith.
Thanking you,
For Apex Finance Ltd.
(Signature)
Company Secretary
Answer the following questions (Any ONE) : [8 Marks]
Definition: Preference shares are those shares which have preferential rights over equity shares regarding:
- Payment of dividend during the lifetime of the company.
- Repayment of capital at the time 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 of dividend accumulate. These arrears are paid before any dividend is paid to equity shareholders in future years.
- Non-Cumulative Preference Shares:
Dividend can be paid only out of profits of that specific year. If not paid, the right to claim dividend lapses. Arrears do not accumulate.
- Participating Preference Shares:
Besides the fixed dividend, these shareholders are entitled to participate in the surplus profit which remains after paying dividend to equity shareholders.
- Non-Participating Preference Shares:
They get only a fixed rate of dividend and do not share in surplus profits. (Most preference shares are non-participating).
- Convertible Preference Shares:
These shares can be converted into equity shares after a certain period.
- Non-Convertible Preference Shares:
These shares cannot be converted into equity shares.
- Redeemable Preference Shares:
These shares are repaid (redeemed) by the company after a specific period as per the terms of issue.
- Irredeemable Preference Shares:
Shares which are not repaid during the lifetime of the company. (Note: As per Companies Act 2013, companies in India can only issue Redeemable Preference Shares).
Provisions for Issue of Debentures (Companies Act, 2013):
- No Voting Rights: A company cannot issue debentures carrying any voting rights. Debenture holders are creditors, not owners.
- Types of Debentures: A company can issue secured or unsecured debentures, and fully or partly convertible debentures.
- Payment of Interest and Redemption: The company must pay interest and redeem the debentures as per the terms and conditions of the issue.
- Debenture Redemption Reserve (DRR): The company must create a Debenture Redemption Reserve account out of profits available for dividend to ensure repayment capability.
- Appointment of Debenture Trustees: If a company issues a prospectus or invites more than 500 people, it must appoint one or more Debenture Trustees to protect the interest of debenture holders.
- Debenture Trust Deed: The company must execute a Debenture Trust Deed to protect the rights of debenture holders.
- Redeemable Debentures: Debentures must be redeemed. The maximum tenure is usually 10 years (30 years for infrastructure companies).
- Liquid Asset Requirement: The company must invest or deposit at least 15% of the amount of debentures maturing during the year ending 31st March of the next year.
- NCLT Intervention: If the company fails to redeem debentures or pay interest, the Debenture Trustee can approach the National Company Law Tribunal (NCLT).