Solution: Secretarial Practice Board Question Paper June 2025

Board Question Paper Solution: June 2025
Secretarial Practice

Time: 3 Hrs. | Max. Marks: 80

Q.1 (A) Select the correct answer from the options given below and rewrite the sentences:

1. The ______ is paid on borrowed capital. (a) interest   (b) discount   (c) dividend

Answer: The interest is paid on borrowed capital.

2. Deposit can be accepted for a minimum of 6 months and maximum for ______ months. (a) 36   (b) 13   (c) 30

Answer: Deposit can be accepted for a minimum of 6 months and maximum for 36 months.

3. Bearer Debenture holders get interest through ______. (a) interest warrant   (b) refund order   (c) interest coupon

Answer: Bearer Debenture holders get interest through interest coupon.

4. ______ has to apply for ISIN. (a) Depositors   (b) Depository Participant   (c) Company

Answer: Company has to apply for ISIN.

5. A financial market is a market in which people trade ______ and derivatives at low transaction costs. (a) gold   (b) financial securities   (c) commodities

Answer: A financial market is a market in which people trade financial securities and derivatives at low transaction costs.

Q.1 (B) Match the pairs:

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:

1. The ratio of different sources of funds in the total capital.

Answer: Capital Structure

2. A document of title of ownership of shares.

Answer: Share Certificate

3. Period within which debenture certificate must be issued by a company.

Answer: 6 months (from the date of allotment)

4. Agreement between Company and Deposit Trustee.

Answer: Deposit Trust Deed

5. A bill which is issued by Reserve Bank of India on behalf of Government of India.

Answer: Treasury Bill

Q.1 (D) Correct the underlined word/s and rewrite the following sentences:

1. Dividend must be paid within 60 days of its declaration.

Answer: Dividend must be paid within 30 days of its declaration.

2. FPO refers to offering of shares to the public for the first time.

Answer: IPO (Initial Public Offer) refers to offering of shares to the public for the first time.

3. When there is recession in economy, sales will increase.

Answer: When there is boom / prosperity in economy, sales will increase.

4. Deposits are the internal source of financing.

Answer: Deposits are the external source of financing.

5. Bond is a source of short term finance.

Answer: Bond is a source of long term finance.

Q.2 Explain the following terms / concepts (Any FOUR):

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):

1. Mr. Jatin is a practising Company Secretary...

a. BDI Bank wants to offer Depository Participant (DP) services. Whom should they approach for registering as DP?
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:

a. Is the Board justified to decide interim dividend of ₹5/- per share even though profits till date are insufficient?
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:

a. Can the company accept deposits from the public?
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):

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):

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):

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):

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

Phone: 020-22334455
Fax: 020-22334466
Ref: DIL/DIV/23-24/55

Date: 25th June, 2025

To,
Mr. Ashok Patil,
15, Ganesh Nagar,
Pune - 411030.

Subject: Reply regarding low rate of dividend

Dear Sir,

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,

Yours faithfully,
For Dynamic Industries Ltd.

(Sd/-)
Company Secretary

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

Phone: 022-66778899
Ref: SL/DEB/INT/25/101

Date: 10th June, 2025

To,
Ms. Rina Shah,
A/12, Sea View Apts,
Mumbai - 400050.

Subject: Payment of Interest on Debentures

Dear Madam,

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,

Yours faithfully,
For Sunshine Ltd.

(Sd/-)
Company Secretary
Encl: Interest Warrant

3. Draft a letter to a depositor regarding repayment of his deposits.

Apex Motors Ltd.

Regd. Office: 22, MIDC, Aurangabad - 431001.
CIN: L11223MH2015PLC998877

Phone: 0240-22331122
Ref: AML/DEP/REP/25/88

Date: 15th June, 2025

To,
Mr. Vijay Kumar,
Plot 4, Kranti Nagar,
Aurangabad - 431005.

Subject: Repayment of Fixed Deposit

Dear Sir,

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,

Yours faithfully,
For Apex Motors Ltd.

(Sd/-)
Company Secretary
Encl: Cheque No. 112233

Q.8 Answer the following questions (Any ONE):

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.

Write short notes on National Stock Exchange?

 Meaning: -National Stock Exchange was established in the year 1992. At present, it is India's biggest stock exchange by volume. It also ranks 3^rd in the world for transacted volume. It has developed into a sophisticated electronic market where the trades take place on computers through NSEI dealer.

The features of NSE are as follows: -

1.       NSE is a company limited by shares.

2.       NSE is an all India level stock exchange

3.       The investors can trade in securities from anywhere in the world through internet.

4.       The settlement takes place on T (trade) + 2 days i.e. trade plus two working days. Thus, the money received within 2 days from the date of sale.

5.       NSE has many indexes but the most famous index is NIFTY.

6.       NSE provides transparency as the investors can check the prices for each tick.

What are the various constituents and concepts in Depository system?

1.      Depository: - A depository can be defined as ‘an institution which transfers the ownership of securities in electronic mode on behalf of its members.’ A depository is a nominee of the investors, who keeps the shares on their behalf. Therefore, the depository acts as a custodian of securities

2.      Depository participant: -Depository participant is the representative of the Depositor. Depository participant acts as intermediary between investors and depositories. An investor has no direct access to the Depositaries. The investor has to trade his securities/share through the Depository Participant. The depository participant has an identity number for identification. It has to maintain accounts of securities of each investor. Depository Participant gives intimation about holdings from time to time by sending a statement of holding or giving a pass-book. If investor desires the services of Depository, he has to open an account with Depository through a Depository Participant. At present in India, there are two depositories. They are

·         National Securities Depositories Limited (NSDL)

·         Central Depositories Services Limited (CDSL)

3.      Beneficial owner: -An investor is known as 'beneficial owner'. He is the person in whose name Demat account is opened. His name is recorded with the depository. He enjoys the rights and benefits of a member such as to get dividend, to get bonus shares, to vote at meeting.

4.      Issuer Company: -It is a company which makes an issue of securities. It must register itself with a depository.

5.      Dematerialisation: -it is the process in which share certificate are converted into electronic form.

6.      Fungibility: -The shares in depositories are fungible. They don't have distinctive number for identification.

7.      Rematerialisation: -Rematerialisation is the process by which shares in electronic form are reconverted into physical form.

8.      International Securities Identification Number (ISN): -it is an identification number given to a security of an issuer company at the time of admitting such security in the depository system.

DEPOSITORY PARTICIPANT

                  Depository participant is the representative of the Depositor. Depository participant acts as intermediary between investors and depositories. An investor has no direct access to the Depositaries. The investor has to trade his securities/share through the Depository Participant. The depository participant has an identity number for identification. It has to maintain accounts of securities of each investor. Depository Participant gives intimation about holdings from time to time by sending a statement of holding or giving a pass-book. If investor desires the services of Depository, he has to open an account with Depository through a Depository Participant. At present in India, there are two depositories. They are

·         National Securities Depositories Limited (NSDL)

·         Central Depositories Services Limited (CDSL)

According to SEBI guidelines financial institutions, banks, stock brokers can be registered as Depository Participant.

EXPLAIN THE NEED and importance OF DEPOSITORY.

Meaning: - A depository can be defined as ‘an institution which transfers the ownership of securities in electronic mode on behalf of its members.’ A depository is a nominee of the investors, who keeps the shares on their behalf. Therefore, the depository acts as a custodian of securities.

The need for depository arose mainly due the following reasons:

1.       Growth in Securities transactions: - There has been considerable growth in securities transactions, especially, in the post-reform period, i.e., since 1991. After 1991, the Govt of India introduced several reforms in the Indian Economy, including capital market reforms.

2.       Limitations of Physical Transfer: -There were several limitations relating to physical transfer of shares. The limitations were

·         Delay in transfer of shares.

·         Problem of bad deliveries

·         High cost of handling and transfer

·         Chances of loss of certificates in transit.

·         Chances of theft of certificates, etc

3.        To comply with global standards: -Almost all the developed markets had introduced the depository system ensuring efficient transfer and settlement of securities. Due to reforms in capital markets, the foreign institutions investors (FIIs) were allowed to deal in stock exchanges. For this purpose the government also introduced the depository Act, 1996.

4.       To enhance liquidity in stock markets: -There was a need to enhance liquidity in Indian Stock Markets. The seller of securities to get immediate cash payment for their transactions. The depository undertakes the trade and settlement processing through its subsidiary.

5.       To ensure transparency in allotment of shares: -Now-a-days, the allotment of shares is to be done only through the Demat mode. The allotment of shares is to be effected through the depository in the Demat account of the investors. This has generated transparency in allotment of shares and reduced manipulations relating to transfer of shares.

6.       Centralised Systems in Securities Dealings: - There was a need to adopt a central system for handling all the securities dealings. This has been made possible by setting up Central depository system, although there are two different depositories (NSDL, and CDSL).

STATE THE PROVISION FOR ISSUE OF DEBENTURES?

1.       A joint stock company can issue debentures at any time.

2.       Debentures can be issued by public company as well as by private company. Private company after securing certificate of incorporation can issue debentures. Public company has to obtain Trading Certificate for the issue of Debentures.

3.       As per section 292(1) the board of Directors has the power to issue debentures. The power must be exercised by means of resolution passed in the Board Meeting.

4.       A company cannot borrow money exceeding the aggregate of the paid capital of the company and its free reserves. As pre section 293 (1) the Act empowers Board of Directors to raise excess money with the consent of members in general meeting. The Articles of Association should specify the maximum amount that company can borrow.

5.       According to the companies Act, company cannot issue debentures carrying voting rights.

6.       Debentures can be issued at par or at premium or even at a discount. They may be issued through prospectus or private arrangement.

7.       Companies (amendment) Act, 2000 prohibits issue of unsecured debentures. Now companies can issue only secured debentures.

BOMBAY STOCK EXCHANGE

BOMBAY stock exchange limited is the oldest stock exchange in Asia with a rich heritage, it is popularly known as ‘BSE’. It was established as “The Native Shares Stock Exchange Association” in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the securities contracts (regulation) Act, 1956.

The Exchange is pivotal (essential) and plays pre-eminent role in the development of the Indian capital market. It is widely recognised. Earlier an Association of persons (AOP) but now the exchange is demutualised and corporatized entity incorporated under the provisions of the company’s act 1956. BSE received its certificate of incorporation on 8^th August 2005, and certificate of commencement of business on 12^th August 2005. The name has been changed to ‘Bombay Stock Exchange Limited”

                                The operations and dealings of BSE were fully computerized and thus the auction (sale) system of share trading was replaced by screen based trading known as BOLT (Bombay on-line Trading System) as in other modern stock exchanges around the world. The BSE SENSEX (SENSITIVE index) also called the BSE 30, is widely used marked index in India and Asia.

                BSE has introduced a centralized online trading system called BSE webx.co.in wherein investors can register themselves with brokers worldwide and undertake transactions.

BSE aims for the following:

1.       Securities transaction to be undertaken on fair basis.

2.       Protecting investors and members interest

3.       Mobilizing resources effectively from those who have it to those who need it.

4.       Establishing a market wherein buyers and sellers can come together effectively.

OVER THE COUNTER EXCHANGE OF INDIA - (OTCEI) AND ITS FEATURES?

Meaning: -OTCEI is the abbreviation of Over the Counter Exchange of India. This is the country’s first ring less and scrip less electronic stock exchange where trading of the securities is done on the computer through a networking of the computers. OTCEI was incorporated under the provisions of section 25 of the companies Act, 1956, with the intention to protect the interest of small investors and small companies. Small companies find it difficult to get their shares and debentures listed on stock exchanges. As a result their securities become untradeable and lack liquidity. OTCEI was established in October 1990, and was promoted by a consortium of financial institution.

FEATURES:

1.       OTCEI provides trading facilities in the securities of small companies which could not meet the listing requirements of stock exchange.

2.       It has nationwide coverage through its dealers.

3.       It offers ringless and screen based trading through fully automated system. Transactions are made through satellite communication network.

4.       Small companies with a paid up capital between Rs. 30Lakh and Rs. 25 Crore are eligible for listing of OTCEI. Companies listed on any other recognised stock exchange cannot be listed on OTCEI and vice-versa.

ROLE/OBJECTIVE/POWER OF SEBI IN MONITORING THE STOCK EXCHANGE

Meaning: -Stock exchange is a specific place where trading of the securities is arranged in an organised method. In simple words it is a place where shares, debentures and bonds (securities) are purchased and sold. The term securities include equity shares, preference shares, debentures, government bonds, etc. including mutual funds.

The government of India established the market watchdog i.e. Securities Exchange Board of India (SEBI) IN April 1988.

SEBI as securities Exchange Board of India became a statutory body under SEBI Act, 1992, and its Head Office located in Mumbai. At present SEBI have offices in Mumbai, Calcutta, New Delhi and Chennai. SEBI consists of the following members.

a.      A Chairman

b.      Two members from the Ministries of the Central Government. Dealing with Finance and Law

c.       Two other members to be appointed by the Central Government.

In order to regulate and promote capital market, SEBI performs following Role.

1.      Regulating the business in stock exchanges and may other securities market.

2.      Registering and regulating the working of stock brokers, share transfer agents, sub brokers, banker to an issue etc.

3.      Promoting and regulating self regulatory organisations.

4.      Prohibiting fraudulent and unfair trade practices relating to securities market.

5.      Registering and regulating the working of venture capital funds and collective investment schemes including mutual funds.

6.      Promoting Investors education and training of intermediaries of securities market.

7.      Prohibiting insider trading in securities.

8.      Conducting research and carrying out publications.

9.      Calling for information, form undertaking inspection, conducting inquiries and audits of stock exchanges and market intermediaries.

OBJECTIVES of SEBI  

The main objectives of SEBI are as under.

1.      To promote fair dealing by the issue of securities and to ensure a market place where (they) companies or institutions can raise funds at relatively low cost.

2.      To provide protection to the investors and protect their rights and interests so that there is a steady flow of savings into the market.

3.      To regulate and develop a code of conduct and fair practices by intermediaries like brokers etc. with a view to make them competitive and professional.

POWERS OF SEBI 

SEBI has given wide posers. Some of which are as follow –

1.      SEBI can ask stock exchange to maintain the prescribed documents and records.

2.      SEBI may ask stock exchange or any member to furnish information and explanation concerning its affairs.

3.      SEBI can approve and amend bye-laws of stock exchange.

4.      It may call periodical returns from stock exchange.

5.      SEBI can licence dealers in securities in some areas.

6.      It can ask a public company to list its shares.

FUNCTION OF STOCK EXCHANGE?

Meaning: - Stock exchange is a specific place where trading of the securities is arranged in an organised method. In simple words it is a place where shares, debentures and bonds (securities) are purchased and sold. The term securities include equity shares, preference shares, debentures, government bonds, etc. including mutual funds.

Presence and vibrant functioning of a stock exchange is necessary for developing economy. It reflects a healthy financial and investment conducive atmosphere in the economy.

The Indian securities market is considered as one of the most promising emerging markets. It is one of the top eight markets of the world.

1.      Liquidity: -It is the Stock Exchange that provides liquidity to private investment in corporate enterprises. The stock exchange provides marketability along with liquidity to the product called securities.

2.      Fair Evaluation of Securities: -Stock exchanges like any other market provide a mechanism (instrument) for evaluating the prices of securities through the basic law of demand and supply. Stock exchange prices help to check the real worth of the securities in the market.

3.      Promotes capital Formation: -Stock exchange motivates the investors to invest their savings in the securities of the reputed companies. As stock exchange is the creation of continuous market where buying and selling of securities continuously goes on. As a result, capital flows continuously into business field. Thus formation of capital goes on.

4.      Protects investors’ interest: -All the transactions in the stock exchanges are effected and controlled by the securities control (regulation) Act 1956. The stock exchanges protect the interest through the strict enforcement of their rules and regulations.

5.      Economic Barometer: -A stock exchange serves as a reliable barometer of a country’s economic status. ‘Stock exchanges support and promote industrial development. It stimulates investment in productive sector which accelerates the process of economic development of the nation.

6.      Motivation to the management to improve its performance: -An exchange allows the trading of listed securities only. While getting the shares listed on exchange, a company is required to follow certain guidelines for protecting the interest of shareholders.

7.      Regulation of speculative transaction: - Speculation is an important part of stock exchange operations. The stock exchange enables speculators to speculate and secure adequate profits through fluctuation in security prices. 

Best utilisation of capital: -The Stock exchange regulates and controls the flow of investment from unproductive to productive, uneconomic to economic, unprofitable to profitable enterprises. Thus, savings of the people are channelized into industry yielding good return and underutilisation of capital is avoided

WRITE SHORT NOTES ON ROLE OF STOCK EXCHANGE (MAR 2009)

Meaning: -Stock exchange is a specific place where trading of the securities is arranged in an organised method. In simple words it is a place where shares, debentures and bonds (securities) are purchased and sold. The term securities include equity shares, preference shares, debentures, government bonds, etc. including mutual funds.

Definition: -Securities contracts Regulation Act, 1956 defines stock exchange as “an association, organisation or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.

The stock exchange plays an important role in capital markets. The role of stock exchanges is vital for the economic development of a nation. The role of stock exchanges is briefly stated as follows.

1.      Encourages Capital Formation: -The main role of stock exchange is that it enables public limited companies to raise long term funds from the stock market. The company can issue shares and debentures and obtain long term funds.

2.      Facilitates Listing of Shares: -The Stock exchanges facilitates listing of shares issued by public limited companies. The companies that issue shares to the public can get their shares listed on more stock exchanges in the country. The listing of shares is done through the listing agreements.

3.      Facilitates Trading of Shares: -The Stock exchanges facilitates trading of shares. The shares listed on the Stock exchanges can be trade. The shares can be traded between the sellers and buyers on the stock exchange.

4.      Generates Employment: -It generates Employment facilities in the country. A number of brokers, sub-brokers, and others do get their employment because of Stock exchanges.

5.      Facilitates Capital Formulation: -The Stock exchanges encourages investors to invest in the primary and secondary stock markets. For investing in stock markets, investors need to save money. Saving lead to investment in shares and other securities. Investment leads to capital formulation.

6.      Stimulates Industrial Development: -The Stock Exchanges facilitates mobilization of long-term funds through the issue of shares and debentures. The long term funds can be utilized by companies for the following purposes.

a.      Expansion and Modernization

b.      Setting up of new projects.

7.      Provides Revenue to the Government: -The Stock Exchanges provide revenue to the government, either directly or indirectly. The Stock exchanges pay tax on the revenue or profits earned by them. Also, the investors who invest on stock markets are subject to capital gains tax.

WRITE SHORT NOTES ON provision of SHARE CERTIFICATE

 Meaning: - A Share Certificate is a document of title to shares. It is issued to the shareholders of the company, as evidence to their shareholding in the company. The company issues the Share Certificate under its Common seal. It must be signed by two directors and countersigned by the authorized signatory or secretary of the company. Every Share Certificate must be stamped with revenue stamp of proper value.

Definition: - Section 84 of the companies Act defines share certificate as ‘A certificate, under the common seal of the company, specifying only the shares held by any member, shall be a prima facie evidence of the title of the member of such shares’.

Contents of Share Certificate

a.   Name and Address of the registered office of the company.

b.   Name(s) of the Shareholder(s).

c.   Serial number of share certificate.

d.   Number of Share(s) held.

e.   Number and class of shares. (i.e. whether Preference or equity shares)

f.     Nominal value and amount paid on each share.

g.   Distinctive Number(s) of shares.

h.   Date of issue of Certificate.

i.     Signature of two directors and one authorized signatory.

j.     Seal of the company against the affixed revenue stamp.

k.   The face value of the shares.

l.     Whether the face value is fully paid or partly paid.

The share certificate is required for the transfer and transmission shares. It is a registered document and not a bearer document. It can be transferred only by following a certain transfer procedure.

Statutory Provision regarding share Certificate

1.      Time Limit: -The share certificate must be prepared and delivered to the shareholders within 3 months of allotment of shares. In case of transfer, the share certificate should Reach the transferee within 2 months from the date if transfer.

2.      Resolution: -Share certificate is issued only after passing of resolution in the board meeting to that effect.

3.      Contents in certificate: -Share certificate must specify the name of the shareholder, number, type of shares, amount paid on each shares etc. it should be signed by two directors and the secretary and bear the common seal of the company.

4.      Entry in the Register: -All the particulars of share certificate must be entered in the Register of Members. These entries must be authenticated by the secretary or signatories to the certificate.

5.      Duplicate and Surrendered Certificates: -If the company issues duplicate certificate, it should be clearly mentioned on the certificate by putting a stamp of word ‘Duplicate’ on the face of the certificate.

In case of surrendered certificates a cancellation mark must be put on the face of the certificate such certificates may be destroyed after three years.

Shares under Depository System: -If the shares are dealt in a depository, after the allotment of shares, company must intimate the depository immediately about the details of allotment even though shares are not in physical form.