H.S.C Secretarial Practice Question Bank Solutions

H.S.C – S.P – QUESTION BANK & SOLUTIONS Important for Board Exam 2026

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Important Chapters: 1 to 8

Long Answers

1) What is share and state its features?

Meaning: According to Section 2(84) of the Companies Act, 2013, "Share means a share in the share capital of a company and includes stock." It is the smallest unit in the total share capital of a company.

Features of Shares:

Meaning: It is the smallest unit of share capital.
Ownership: The owner of a share is called a shareholder. It shows the ownership of the shareholder in the company.
Distinctive Number: Each share has a distinct number for identification (except in Demat form).
Evidence of Title: A share certificate is issued as proof of ownership.
Value of a Share: It has Face Value, Issue Price, and Market Value.
Rights: It confers rights like receiving dividends, attending meetings, and voting.
Income: Shareholders get a share in the net profit called Dividend.
Transferability: Shares of a public limited company are freely transferable.

2) What is an equity share? Explain its features.

Meaning: Equity shares are those shares which are not preference shares. They do not enjoy preference for dividend payment or repayment of capital.

Features:

Permanent Capital: The amount is not refunded during the lifetime of the company (except buy-back).
Fluctuating Dividend: The rate of dividend depends on profit; it is not fixed.
Rights: They enjoy voting rights, right to share profit, right to inspect books, and right to transfer shares.
No Preferential Rights: They are paid dividend and capital after preference shareholders.
Controlling Power: Equity shareholders are the real masters/owners of the company.
Risk Capital: They bear the maximum risk in the company.
Bonus Issue: Only equity shareholders are entitled to bonus shares.

3) Explain the different types of preference shares.

Types of Preference Shares:

Cumulative Preference Shares: Unpaid dividends accumulate and are paid in future years.
Non-Cumulative Preference Shares: Dividend is lost if not paid in a particular year.
Participating Preference Shares: They get a fixed dividend + a share in surplus profit.
Non-Participating Preference Shares: They get only the fixed rate of dividend.
Convertible Preference Shares: Can be converted into equity shares after a specific period.
Non-Convertible Preference Shares: Cannot be converted into equity shares.
Redeemable Preference Shares: Capital is repaid after a fixed period.
Irredeemable Preference Shares: Capital is not repaid during the lifetime (Note: As per Companies Act 2013, companies cannot issue irredeemable shares).

4) What are preference shares? State its features.

Meaning: Preference shares are shares that have preferential rights regarding payment of dividend and repayment of capital upon winding up.

Features:

Preference for Dividend: First right to receive dividend before equity shares.
Preference for Repayment of Capital: First right to get capital back during winding up.
Fixed Return: The rate of dividend is pre-determined and fixed.
Nature of Capital: It is safe capital provided by cautious investors.
Market Value: Usually remains stable compared to equity shares.
Voting Rights: They do not have normal voting rights; they vote only on matters affecting their interest.
No Bonus Shares: They are not entitled to bonus issues.

5) What is Debenture? Discuss the different types of debentures.

Meaning: 'Debenture' comes from the Latin word 'debere' (to owe). It is an instrument acknowledging a debt by the company.

Types of Debentures:

Secured Debentures: Backed by a charge on company assets.
Unsecured Debentures: No security is offered.
Registered Debentures: Name of the holder is recorded in the Register of Debenture Holders.
Bearer Debentures: Transferable by mere delivery; name not registered.
Redeemable Debentures: Repaid after a specific period.
Irredeemable Debentures: Repaid only at the time of winding up.
Convertible Debentures: Can be converted into equity shares.
Non-Convertible Debentures: Cannot be converted into shares.

6) Define Debenture and explain the features of debentures.

Definition: Section 2(30) of Companies Act 2013: "Debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not."

Features:

Promise: It is a written promise to repay a debt.
Face Value: Usually has a high face value (e.g., ₹100 or multiples).
Time of Repayment: The due date for principal repayment is specified.
Interest: Fixed rate of interest is paid periodically, regardless of profit.
Parties: Company, Trustees, and Debenture holders.
Authority to Issue: Board of Directors has the power to issue debentures.
Status of Holder: Debenture holder is a creditor of the company.
Security: Usually secured by a charge on assets.

7) Explain the two methods a company can use to make its public offer of shares.

Public Offer: Offering shares to the general public.

Initial Public Offer (IPO):
- This is the first time a company offers its shares to the public.
- It is done by an unlisted public company to get listed.
- Usually done to raise capital for expansion.
Further Public Offer (FPO):
- This happens when an already listed company makes a fresh issue of shares to the public.
- It is subsequent to an IPO.
- Used to raise additional capital.

Secretarial Practice Board Papers

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S.P. - March 2024 - Marathi Medium Download QP Answer Key Answer Key
S.P. - March 2024 - Hindi Medium View Answer Key
S.P. - June 2024 - English Medium View Answer Key
S.P. - March 2023 - English 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

8) Explain briefly the different types of shares offered by a company to its existing Equity shareholders.

Rights Issue:
- Shares offered to existing equity shareholders in proportion to their existing holding.
- It is a pre-emptive right.
- Usually offered at a price lower than the market price.
Bonus Shares:
- Shares issued free of cost to existing equity shareholders.
- Issued out of accumulated profits or reserves (Capitalization of reserves).
- Given in proportion to existing holdings.
- It is a gift to shareholders.

9) Explain the statutory provisions for allotment of shares.

These are provisions laid down by the Companies Act, 2013:

Registration of Prospectus: A copy must be filed with the Registrar of Companies (ROC).
Application Money: Must be at least 5% of the face value (or as specified by SEBI, typically 25%).
Minimum Subscription: 90% of the issue size must be subscribed within 30 days of opening the issue.
Closing of Subscription List: The list must be open for at least 3 working days and not more than 10.
Basis of Allotment: Must be decided in consultation with the Stock Exchange.
Oversubscription: Allotment must be pro-rata or as per SEBI guidelines.
Permission to Deal: Application to stock exchange for listing must be made.

10) Briefly explain the provisions of Companies Act, 2013 for issue of debentures.

No Voting Rights: Company cannot issue debentures with voting rights.
Types: Can issue secured/unsecured, convertible/non-convertible debentures.
Payment of Interest and Redemption: Must be done as per terms. Default leads to penalties.
Debenture Certificate: Must be issued within 6 months of allotment.
Debenture Redemption Reserve (DRR): Company must create DRR out of profits available for dividend.
Appointment of Debenture Trustees: Mandatory if prospectus is issued to more than 500 people.
Debenture Trust Deed: Must be executed to protect the interest of holders.

Short Notes

1) Factors affecting fixed capital requirement / working capital requirement

Fixed Capital Factors: Nature of business (Manufacturing needs more), Scale of operation, Scope of production, Lease or buy decision, Arrangement of sub-contracts, Old or new assets.
Working Capital Factors: Nature of business (Service/Trading), Volume of sales, Length of production cycle, Credit terms (allowed vs received), Growth and expansion, Inflation.

2) Features of Bonds / Interest

Bonds: Debt security, Long-term finance, Creditor status, Fixed interest rate, Repayment at maturity, No voting rights.
Interest: It is the cost of borrowed capital. It is a fixed liability. Paid periodically. Tax-deductible expense. Paid to Debenture holders/Depositors/Banks.

3) Functions of Stock Exchange / SEBI

Stock Exchange: Mobilization of savings, Capital formation, Pricing of securities, Economic barometer, Protection of investors, Liquidity provider.
SEBI (Securities and Exchange Board of India): Protect interests of investors, Promote development of securities market, Regulate the market, Register and regulate intermediaries (brokers), Prohibit insider trading.

4) Rules governing unpaid and unclaimed dividend

Unpaid Dividend Account: If dividend is not claimed within 30 days of declaration, company must transfer it to 'Unpaid Dividend Account' within 7 days.
IEPF: Any money remaining in the Unpaid Dividend Account for 7 years must be transferred to the Investor Education and Protection Fund (IEPF).
Details: Company must publish details of such shareholders on its website.

5) General principles / rules for allotment of shares

Proper Authority: Only Board of Directors can allot.
Against Application: Allotment only against written application.
Reasonable Time: Within 60 days of receipt of application money.
Communication: Letter of Allotment or Advice must be sent.
Absolute and Unconditional: Must match the terms of the prospectus.

6) Contents of Shares Certificate / Circular or Advertisement for Deposit

Share Certificate: Company name, CIN, Folio No., Name of member, No. of shares, Distinctive numbers, Amount paid-up, Common Seal, Signatures of 2 Directors + Secretary.
Circular for Deposits: Financial position, Credit rating, Details of the scheme (tenure, interest), Management details, statutory declarations.

7) Explain DP as the constituent of Depository system

Depository Participant (DP):

Agent of the Depository (NSDL/CDSL).
Link between the investor and the Depository.
Usually banks, brokers, or financial institutions.
Investors open Demat accounts with the DP.
DP executes instructions of the investor (buying/selling).

8) Advantages of Depository system to Investor

Safety: Elimination of risks like theft, loss, or mutilation of certificates.
Speed: Immediate transfer and settlement.
Convenience: Easy portfolio monitoring.
Cost-effective: No stamp duty on transfer.
Automatic updates: Bonus, rights, and dividends are credited automatically.

9) Amount of deposits that different types of companies can collect by way of deposits

Private Company: Up to 100% of paid-up capital + free reserves.
Public Company (Non-Eligible): Up to 35% of paid-up capital + free reserves (from members only).
Eligible Public Company:
- From Members: Up to 10%
- From Public: Up to 25%
- Total: 35% of paid-up capital + free reserves.
Government Company: Up to 35% of paid-up capital + free reserves.

10) Book Building Method

A method of issuing shares where the price is not fixed by the company but discovered through bidding.
Company issues a 'Red Herring Prospectus' with a price band (Floor Price and Cap Price).
Investors bid for shares within the range.
The final price (Cut-off price) is determined based on demand.
Used commonly in IPOs.

11) State the provisions related to issue of Bonus Shares

Authorized by Articles of Association.
Recommended by Board and approved by shareholders.
Cannot be issued out of revaluation reserves.
No default in payment of interest/principal on debts.
Shares made fully paid up before bonus issue.
Once announced, cannot be withdrawn.

Letters

Note: For all letters, assume standard layout: Heading (Company Name, Address), Date, Reference No., Inside Address, Subject, Salutation, Body, Closing, and Enclosures.

1) Write a letter to the shareholder regarding issue of Bonus Shares.

SUNRISE INDUSTRIES LTD.
12, MIDC, Andheri (E), Mumbai - 400093.

Ref: B/2025/22 Date: 15th Jan 2025

To,
Mr. Rahul Sharma,
Pune.

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 at the Extra-Ordinary General Meeting held on 10th Jan 2025, 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 your holding and bonus shares allotted:
1. Shares held on Record Date: 100
2. Bonus Shares Allotted: 100
3. Total Holding: 200
4. DP ID / Client ID: IN300123 12345678

The bonus shares have been credited to your Demat account.

Thanking you,
Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary

2) Write a letter to the member for the issue of Share Certificate.

SUNRISE INDUSTRIES LTD.

Subject: Issue of Share Certificate

Dear Madam,
We are pleased to inform you that your request for the issue of physical share certificates has been processed. In accordance with your application and subsequent allotment, the share certificate is enclosed herewith.

Details:
Folio No: A-102
Certificate No: 5501
Distinctive Nos: 1001 to 1100
No. of Shares: 100

Kindly acknowledge the receipt.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary
Encl: Share Certificate

3) Draft a letter of allotment to debenture holder.

SUNRISE INDUSTRIES LTD.

Subject: Allotment of Debentures

Dear Sir,
With reference to your application dated 1st Jan 2025, we are pleased to inform you that the Board of Directors has allotted you 100, 10% Secured Non-Convertible Debentures of ₹100 each.

Details:
1. No. of Debentures applied: 100
2. No. of Debentures allotted: 100
3. Amount Received: ₹10,000
4. Interest Rate: 10% p.a.

The Debenture Certificate will be sent to you shortly / credited to your Demat account.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary

4) Write a letter to the debenture holder regarding payment of interest through Interest Warrant.

Subject: Payment of Interest on Debentures

Dear Sir,
I am directed to inform you that the Board of Directors has approved the payment of interest @ 10% p.a. on your debentures for the year ended 31st March 2025.

Please find enclosed the Interest Warrant No. IW-202 for ₹1,000/- (Rupees One Thousand Only), being the interest due on your holding of 100 debentures. TDS has been deducted as applicable.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary
Encl: Interest Warrant

5) Draft a letter to debenture holder informing him about redemption of debentures.

Subject: Redemption of Debentures

Dear Sir,
This is to inform you that the 10% Non-Convertible Debentures issued by the company in 2020 are due for redemption on 31st March 2025.

Please surrender your original Debenture Certificate No. 450 at the company's registered office along with the enclosed Discharge Form, duly filled and signed. Upon receipt, the redemption amount will be transferred to your bank account / sent via cheque.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary

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

Subject: Renewal of Fixed Deposit

Dear Sir,
We received your application dated 10th Jan 2025 regarding the renewal of your Fixed Deposit Receipt No. 505 for a further period of one year.

We are pleased to inform you that the Board has approved the renewal. The new Fixed Deposit Receipt (No. 605) is enclosed herewith.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary
Encl: New Fixed Deposit Receipt

7) Draft a letter of thanks to the depositor of a company.

Subject: Acknowledging Receipt of Deposit

Dear Sir/Madam,
We are in receipt of your application dated 1st Jan 2025 along with a Cheque of ₹50,000/- for placement in Fixed Deposit Scheme.

We thank you for the confidence shown in our company. The official Fixed Deposit Receipt will be sent to you within 21 days as per statutory requirements.

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary

8) Draft a letter to depositor informing him about payment of interest electronically.

Subject: Electronic Payment of Interest on Deposit

Dear Sir,
We are pleased to inform you that interest on your Fixed Deposit for the year ended 31st March 2025 has been remitted electronically to your bank account.

Details:
Deposit Receipt No: 808
Interest Amount: ₹5,000
Bank Name: HDFC Bank
Account No: XXXXXX1234
Date of Credit: 5th April 2025

Yours faithfully,
For Sunrise Industries Ltd.,
Sd/-
Company Secretary

Distinguish Between

1) Fixed Capital and Working Capital

Point	Fixed Capital	Working Capital
Meaning	Capital used for buying fixed assets.	Capital used for day-to-day operations.
Nature	Stays in business almost permanently.	Circulating capital (keeps changing).
Purpose	To acquire land, building, machinery.	To buy raw materials, pay wages.
Risk	High risk involved.	Less risk involved.

2) Equity Shares and Preference Shares

Point	Equity Shares	Preference Shares
Dividend Rate	Fluctuating (depends on profit).	Fixed rate.
Voting Rights	Full voting rights.	No voting rights (generally).
Refund of Capital	Last priority (after pref. shares).	Priority over equity shares.
Risk	High risk.	Low risk (safe capital).
Bonus Shares	Eligible for bonus shares.	Not eligible.

3) Share and Debenture

Point	Share	Debenture
Status	Owner of the company.	Creditor of the company.
Nature	Owned capital.	Borrowed capital (Loan).
Return	Dividend.	Interest.
Certainty of Return	Uncertain (only if profit exists).	Fixed and certain (paid even in loss).
Voting	Has voting rights.	No voting rights.

4) Owned Capital and Borrowed Capital

Point	Owned Capital	Borrowed Capital
Source	Shares, Retained Earnings.	Debentures, Bonds, Deposits, Loans.
Return	Dividend (Fluctuating).	Interest (Fixed).
Repayment	Not repaid (except winding up).	Repaid after a fixed period.
Control	Holders have control (voting).	No control over management.

5) Rights Shares and Bonus Shares

Point	Rights Shares	Bonus Shares
Price	Paid by shareholder (usually discounted).	Free of cost (Gift).
Purpose	To raise fresh capital.	To capitalize accumulated profits.
Subscription	Shareholder can accept or renounce.	Automatically allotted.
Cash Inflow	Company receives cash.	No cash inflow for company.

6) Transfer of Shares and Transmission of Shares

Point	Transfer	Transmission
Nature	Voluntary act of shareholder.	Involuntary (Operation of Law).
Cause	Sale or gift.	Death, insolvency, or insanity.
Consideration	Money is involved (usually).	No money involved.
Instrument	Transfer deed required.	No transfer deed required.

7) Final Dividend and Interim Dividend

Point	Final Dividend	Interim Dividend
Declaration	Declared at AGM after year-end.	Declared between two AGMs.
Authority	Recommended by Board, Declared by Members.	Declared by Board of Directors.
Source	Current profit or Free reserves.	Current year's profit only.
Revocation	Cannot be cancelled once declared.	Can be cancelled before payment (rare).

8) Dividend and Interest

Point	Dividend	Interest
Meaning	Return on investment in shares.	Return on borrowed capital/loan.
Paid to	Shareholders (Owners).	Creditors (Debenture holders/Lenders).
Obligation	Not compulsory (unless preference).	Compulsory liability.
Tax	Appropriation of profit (Not deductible).	Charge against profit (Tax deductible).

9) Primary market and Secondary market

Point	Primary Market (New Issue)	Secondary Market (Stock Exchange)
Securities	New securities issued for the first time.	Existing securities are traded.
Parties	Company and Investors.	Investor and Investor.
Price	Fixed by company.	Determined by demand and supply.
Location	No fixed geographical location.	Specific physical place (or electronic platform).

10) Money market and Capital market

Point	Money Market	Capital Market
Duration	Short-term funds (up to 1 year).	Medium and Long-term funds (> 1 year).
Instruments	Treasury bills, Commercial paper, CD.	Shares, Debentures, Bonds.
Risk	Low risk.	High risk.
Regulator	Reserve Bank of India (RBI).	SEBI.