Board Question Paper Solution: June 2025
Secretarial Practice
Q.1 (A) Select the correct answer from the options given below and rewrite the sentences: [5]
Q.1 (B) Match the pairs: [5]
| Group 'A' | Group 'B' (Correct Answer) |
|---|---|
| (a) Bonus shares | (6) Capitalisation of profit |
| (b) Regret Letter | (3) Non-allotment of shares |
| (c) ECS | (1) Electronic Clearing Service |
| (d) Dividend | (8) Shareholder |
| (e) SEBI | (7) To protect the interest of investors in securities market |
Q.1 (C) Write a word or a term or a phrase which can substitute each of the following statements: [5]
Q.1 (D) Correct the underlined word/s and rewrite the following sentences: [5]
Q.2 Explain the following terms / concepts (Any FOUR): [8]
1. Bear
A Bear is a speculator in the stock market who expects the prices of securities to fall in the future. He sells securities at present prices to buy them back later at lower prices, thereby making a profit. He is often referred to as a "mandi-wala".
2. Investment Decision
Investment decision refers to the capital budgeting decision regarding the allocation of funds to different assets. It involves making decisions about where to deploy the funds to earn the highest possible returns for the investors.
3. Borrowed Capital
Borrowed capital refers to the funds raised by a company through loans, debentures, deposits, or bonds. It is a debt that the company owes to external parties and must be repaid after a fixed period with interest.
4. Dematerialization
Dematerialization (Demat) is the process of converting physical share certificates into an electronic form. The shares are held in a Demat account with a Depository Participant (DP), making transfer and holding easier and safer.
5. Right Issue
When a company wants to raise further capital by issuing new shares, it must first offer these shares to its existing equity shareholders in proportion to their existing holdings. This offering is known as a Right Issue.
6. Primary Market
The Primary Market, also known as the New Issues Market, is the market where companies issue new securities (shares, debentures, etc.) to the public for the first time. Methods include IPO, FPO, and Rights Issue.
Q.3 Study the following cases / situations and express your opinion (Any TWO): [6]
1. Mr. Jatin is a practising Company Secretary...
Ans: They should approach the Depository (NSDL or CDSL) for affiliation and must obtain a certificate of registration from SEBI.
b. KM Financial wants to offer Debenture Trustee services. Where should they apply for getting registered?
Ans: They should apply to SEBI (Securities and Exchange Board of India) for registration as a Debenture Trustee.
c. TT Company Ltd. wants to issue an IPO. Should it get itself registered with SEBI?
Ans: No, the company itself does not "register" with SEBI, but it must file a draft prospectus/offer document with SEBI for approval before the issue.
2. Sai Company Ltd. decides to pay interim dividend:
Ans: No. Interim dividend is paid out of surplus in the profit and loss account or out of profits of the financial year. If profits are insufficient, it is financially imprudent and legally restricted to declare it.
b. Can the Board declare dividend out of free reserves?
Ans: No. Interim dividend cannot be declared out of free reserves.
c. Can the Board declare dividend out of Capital?
Ans: No. Dividend can never be paid out of capital. It must be paid out of profits.
3. Moon Private Ltd. Company wants to raise funds through deposits:
Ans: No. A Private Limited Company cannot accept deposits from the public. It can only accept deposits from its members, directors, or their relatives.
b. Which document should the company issue to invite deposits?
Ans: The company should issue a Circular to invite deposits from its members.
c. What is the maximum period for which company can accept deposits?
Ans: The maximum period for which a company can accept deposits is 36 months.
Q.4 Distinguish between the following (Any THREE): [12]
1. Fixed Capital and Working Capital
| Point | Fixed Capital | Working Capital |
|---|---|---|
| Meaning | It refers to capital used for acquiring fixed assets which are used for a longer period. | It refers to capital used to carry out day-to-day business operations. |
| Nature | It stays in the business almost permanently. | It circulates in the business (Circulating Capital). |
| Purpose | Used to buy land, building, machinery, etc. | Used to buy raw materials, pay wages, utility bills, etc. |
| Risk | Investment involves high risk. | Investment involves less risk. |
2. Initial Public Offer (IPO) and Further Public Offer (FPO)
| Point | Initial Public Offer (IPO) | Further Public Offer (FPO) |
|---|---|---|
| Meaning | It is the first-time offer of shares by an unlisted company to the public. | It is the offer of shares by an already listed company to the public. |
| Issuer Status | Issued by an unlisted company. | Issued by a listed company. |
| Order | IPO precedes FPO. | FPO follows IPO. |
| Risk | Riskier for investors as company performance is hard to predict. | Less risky as past performance data is available. |
3. Final Dividend and Interim Dividend
| Point | Final Dividend | Interim Dividend |
|---|---|---|
| Meaning | Dividend declared at the end of the financial year. | Dividend declared between two Annual General Meetings (AGMs). |
| Who Declares | Recommended by Board, Declared by Shareholders. | Declared by the Board of Directors. |
| Timing | Declared at the AGM. | Declared before the finalization of annual accounts. |
| Revocation | Once declared, it cannot be revoked. | Can be revoked with shareholders' consent in certain cases (though generally creates a debt). |
4. Money Market and Capital Market
| Point | Money Market | Capital Market |
|---|---|---|
| Meaning | A market for lending and borrowing short-term funds. | A market for lending and borrowing long-term funds. |
| Time Period | Funds are traded for a period up to 1 year. | Funds are traded for a period exceeding 1 year. |
| Instruments | Treasury bills, Commercial paper, Certificate of Deposit, etc. | Shares, Debentures, Bonds, etc. |
| Risk | Low risk. | High risk compared to money market. |
Q.5 Answer in brief (Any TWO): [8]
1. State the contents of a Share Certificate.
A share certificate is a document of title to the shares. Its contents include:
- Name of the Company, CIN, and Registered Office Address.
- Folio Number of the member.
- Share Certificate Number.
- Name of the Member.
- Nature of shares (Equity/Preference), number of shares, and Distinctive numbers.
- Amount paid up on shares.
- Common Seal of the company (if any).
- Signatures of two Directors and the Company Secretary.
2. Explain any four advantages of Depository System to investor.
- Elimination of Risk: Risks associated with physical certificates like theft, loss, mutilation, or forgery are eliminated.
- Easy and Quick Transfer: Shares can be transferred immediately without sending the physical deed to the company. Settlement is faster (T+1).
- Reduction in Cost: No stamp duty is required for transfer of shares in demat form. Postal charges are also saved.
- Automatic Credit: Benefits like bonus shares, rights shares, and dividends are automatically credited to the investor's account.
3. State any four terms and conditions regarding acceptance of deposits.
- Period of Deposit: Deposits cannot be accepted for less than 6 months or more than 36 months.
- Amount of Deposit: There is a ceiling on the amount a company can collect based on its paid-up capital and free reserves.
- Interest Rate: The rate of interest cannot exceed the maximum rate prescribed by the RBI/Central Government.
- No Default: The company must not have defaulted in repayment of past deposits or interest thereon.
- Deposit Insurance: Company may need to obtain deposit insurance (if applicable under rules).
Q.6 Justify the following statements (Any TWO): [8]
1. Preference shares do not carry normal voting rights.
Justification: Preference shareholders are not the true owners of the company; they are cautious investors who prioritize fixed income and safety of capital. Equity shareholders bear the ultimate risk and thus enjoy voting rights. The Companies Act restricts voting rights of preference shareholders only to matters that directly affect their rights (e.g., winding up or reduction of capital), or if their dividend has remained unpaid for two years or more.
2. Debenture Trustees are appointed by a company while issuing debentures.
Justification: When a company issues debentures to more than 500 people or invites the public to subscribe, it is mandatory to appoint a Debenture Trustee. The Trustee acts as a guardian to protect the interest of debenture holders. They hold the charge on the company’s assets on behalf of the debenture holders and ensure the company fulfills its obligations regarding interest and principal repayment.
3. Dividend is paid out of profits of the company.
Justification: Dividend is a return on investment paid to shareholders. According to the Capital Maintenance Doctrine, capital cannot be returned to shareholders in the form of dividends. Therefore, dividends must be paid only out of the current year's profits (after providing for depreciation) or out of accumulated profits of previous years. Paying dividend out of capital is illegal.
4. Depository provides easy and quicker transfer of shares.
Justification: In the depository system, securities are held in electronic mode. The transfer of ownership is done through simple book entries without the physical movement of share certificates or transfer deeds. This eliminates the time required for verifying signatures and postal delays. The settlement cycle is shortened (e.g., T+1), making the transfer process instantaneous and hassle-free.
Q.7 Attempt the following (Any TWO): [10]
1. Draft a reply letter resolving the query of a member on low rate of dividend.
Dynamic Industries Ltd.
Regd. Office: 12, Industrial Estate, Pune - 411001.
CIN: L12345MH2000PLC123456
Fax: 020-22334466
Ref: DIL/DIV/23-24/55
Mr. Ashok Patil,
15, Ganesh Nagar,
Pune - 411030.
We are in receipt of your letter dated 20th June 2025 regarding the low rate of dividend declared by the company for the financial year 2024-25.
We would like to humbly inform you that while the company has earned sufficient profit this year, the Board of Directors has decided to transfer a larger portion of profits to the General Reserve. This decision was taken to finance the upcoming expansion project of our new manufacturing unit at Nashik without raising external debt.
This reinvestment of profit will strengthen the financial position of the company and is expected to yield higher returns and capital appreciation for shareholders in the near future. We hope you will appreciate this decision taken for the long-term growth of the company.
Thanking you,
2. Write a letter to the debenture holder regarding payment of interest through Interest Warrant.
Sunshine Ltd.
Regd. Office: 45, Nariman Point, Mumbai - 400021.
CIN: L98765MH2010PLC654321
Ref: SL/DEB/INT/25/101
Ms. Rina Shah,
A/12, Sea View Apts,
Mumbai - 400050.
I am instructed by the Board of Directors to inform you that the Board has approved the payment of interest @ 10% p.a. on the 10% Non-Convertible Debentures held by you for the year ending 31st March 2025.
The details of the interest payment are as follows:
| Folio No. | No. of Debentures | Gross Interest (₹) | TDS (₹) | Net Interest (₹) | Interest Warrant No. |
|---|---|---|---|---|---|
| D-105 | 100 | 1,000 | Nil | 1,000 | IW-4055 |
The Interest Warrant No. IW-4055 for ₹1,000/- is enclosed herewith. Please acknowledge the receipt.
Thanking you,
3. Draft a letter to a depositor regarding repayment of his deposits.
Apex Motors Ltd.
Regd. Office: 22, MIDC, Aurangabad - 431001.
CIN: L11223MH2015PLC998877
Ref: AML/DEP/REP/25/88
Mr. Vijay Kumar,
Plot 4, Kranti Nagar,
Aurangabad - 431005.
This is to inform you that your Fixed Deposit Receipt No. 5678 dated 15th June 2022 for ₹50,000/- has matured today, i.e., 15th June 2025.
The Board of Directors has approved the repayment of the principal amount along with the accrued interest. The details are as follows:
1. Principal Amount: ₹50,000/-
2. Interest (Net of TDS): ₹5,000/-
Total Amount Payable: ₹55,000/-
We are enclosing herewith a cheque bearing No. 112233 dated 15th June 2025 drawn on Axis Bank, Aurangabad Branch, for ₹55,000/-.
We thank you for the trust and confidence shown in our company and look forward to your continued support.
Thanking you,
Q.8 Answer the following questions (Any ONE): [8]
1. Define debenture and explain the features of debentures.
Definition:
The term 'Debenture' is derived from the Latin word 'debere', which means 'to owe'.
Section 2(30) of the Companies Act, 2013 defines debenture as: "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 of Debentures:
- Promise to Pay: A debenture is a written promise by the company to pay a specified sum of money to the holder after a specific period or at the time of winding up.
- Face Value: Debentures usually have a high face value (e.g., ₹100 or multiples thereof) compared to shares.
- Time of Repayment: Debentures are issued for a fixed period. The principal amount is repaid on the maturity date specified in the debenture certificate.
- Priority in Repayment: Debenture holders have priority over shareholders (both equity and preference) in repayment of capital at the time of winding up.
- Assurance of Interest: Interest is paid at a fixed rate periodically (e.g., half-yearly or annually). It is a liability and must be paid regardless of whether the company makes a profit or not.
- Security: Debentures are usually secured by a charge (fixed or floating) on the assets of the company.
- Status of Holder: A debenture holder is a creditor of the company, not an owner.
- No Voting Rights: Debenture holders do not carry any voting rights in the company's meetings (except on matters affecting their own interests). Section 71(2) prohibits the issue of debentures with voting rights.
2. Explain the classification of share capital.
Share capital of a company can be classified into the following types:
- Authorized (Nominal/Registered) Capital: This is the maximum amount of capital that a company is authorized to raise by its Memorandum of Association. The company pays stamp duty on this amount. It can be increased by altering the MOA.
- Issued Capital: This is the part of authorized capital that is offered to the public or existing shareholders for subscription. The remaining part is called 'Unissued Capital'.
- Subscribed Capital: This is the part of issued capital that has been actually subscribed (applied for) by the investors. If the entire issued capital is taken up, Subscribed Capital = Issued Capital.
- Called-up Capital: The company may not demand the full face value of shares at once. The part of the face value which the company has called upon shareholders to pay is called 'Called-up Capital'. The remaining is 'Uncalled Capital'.
- Paid-up Capital: This is the actual amount of money received by the company from the shareholders against the called-up amount.
Paid-up Capital = Called-up Capital - Calls-in-Arrears. - Reserve Capital: It is that portion of uncalled capital which a company decides (by special resolution) to call up only in the event of winding up of the company. It serves as a security for creditors.