Showing posts with label Secretarial practice. Show all posts
Showing posts with label Secretarial practice. Show all posts

Maharashtra Board HSC Secretarial Practice Question Paper Solution July 2022

Board Question Paper : July 2022

Secretarial Practice - Solutions

Time: 3 Hrs. | Max. Marks: 80

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

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

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

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

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

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

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

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

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

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

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

Secretarial Practice Board Papers

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

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

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

The provisions for Rights Issue are as follows:

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

Factors affecting fixed capital requirement include:

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

The advantages of the depository system to the company are:

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

ABC LIMITED

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

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

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

Subject: Issue of Share Certificate

Dear Sir,

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

The details of the Share Certificate are as follows:

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

Please acknowledge the receipt of the same.

Thanking you,

Yours faithfully,
For ABC Limited

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

SUNRISE INDUSTRIES LTD.

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

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

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

Subject: Allotment of Debentures

Dear Madam,

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

The details of allotment are as follows:

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

The Debenture Certificate will be sent to you shortly.

Thanking you,

Yours faithfully,
For Sunrise Industries Ltd.

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

OMEGA TRADERS LTD.

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

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

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

Subject: Payment of Interest on Fixed Deposit

Dear Sir,

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

Details of the deposit and interest are given below:

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

Please detach the Interest Warrant along the perforated line.

Thanking you,

Yours faithfully,
For Omega Traders Ltd.

(Signature)
Company Secretary

Encl: Interest Warrant No. 3456

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

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

Features of Equity Shares:

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

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

  1. Pass Resolution in Board Meeting: The Board of Directors must pass a resolution regarding the amount, type of debentures, terms of issue, and call for an EGM (Extraordinary General Meeting) if the borrowing limit exceeds powers.
  2. Extraordinary General Meeting (EGM): If the borrowing exceeds the limit of paid-up capital and free reserves, the shareholders' approval is required through a Special Resolution in EGM.
  3. Filing with Registrar of Companies (ROC): The company must file the special resolution and a copy of the prospectus or statement in lieu of prospectus with the ROC.
  4. Credit Rating: The company must obtain a credit rating from one or more credit rating agencies (like CRISIL, CARE). The rating must be mentioned in the offer document.
  5. Enter into Underwriting Agreement: If needed, the company enters into an agreement with underwriters to ensure the subscription of the issue.
  6. Appointment of Debenture Trustees: If the company issues a prospectus to more than 500 people, it must appoint Debenture Trustees to protect the interest of debenture holders.
  7. Issue of Prospectus / Letter of Offer: The company issues the prospectus to the public inviting them to subscribe to the debentures.
  8. Open Separate Bank Account: A separate bank account is opened in a scheduled bank to receive the application money.
  9. Receiving Application Money: Applicants submit the application form along with the money to the bank within the specified time.
  10. Board Meeting for Allotment: After the subscription list closes, a Board Meeting is held to decide the allotment of debentures. A resolution for allotment is passed.
  11. Issue of Debenture Certificates: The certificates must be issued within 6 months from the date of allotment.
  12. Making Entries in Register of Debenture Holders: The Secretary records the details of the allotment in the Register of Debenture Holders within 7 days of the Board approval.
Question Paper Page No. 1 Question Paper Page No. 2 HSC Secretarial Practice July 2022 Question Paper
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HSC Secretarial Practice Important Question Bank 2026

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

SOURCE: OMTEX Classes
contact@omtexclasses.com
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:
  1. Meaning: It is the smallest unit of share capital.
  2. Ownership: The owner of a share is called a shareholder. It shows the ownership of the shareholder in the company.
  3. Distinctive Number: Each share has a distinct number for identification (except in Demat form).
  4. Evidence of Title: A share certificate is issued as proof of ownership.
  5. Value of a Share: It has Face Value, Issue Price, and Market Value.
  6. Rights: It confers rights like receiving dividends, attending meetings, and voting.
  7. Income: Shareholders get a share in the net profit called Dividend.
  8. 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:
  1. Permanent Capital: The amount is not refunded during the lifetime of the company (except buy-back).
  2. Fluctuating Dividend: The rate of dividend depends on profit; it is not fixed.
  3. Rights: They enjoy voting rights, right to share profit, right to inspect books, and right to transfer shares.
  4. No Preferential Rights: They are paid dividend and capital after preference shareholders.
  5. Controlling Power: Equity shareholders are the real masters/owners of the company.
  6. Risk Capital: They bear the maximum risk in the company.
  7. Bonus Issue: Only equity shareholders are entitled to bonus shares.
3) Explain the different types of preference shares.
Types of Preference Shares:
  1. Cumulative Preference Shares: Unpaid dividends accumulate and are paid in future years.
  2. Non-Cumulative Preference Shares: Dividend is lost if not paid in a particular year.
  3. Participating Preference Shares: They get a fixed dividend + a share in surplus profit.
  4. Non-Participating Preference Shares: They get only the fixed rate of dividend.
  5. Convertible Preference Shares: Can be converted into equity shares after a specific period.
  6. Non-Convertible Preference Shares: Cannot be converted into equity shares.
  7. Redeemable Preference Shares: Capital is repaid after a fixed period.
  8. 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:
  1. Preference for Dividend: First right to receive dividend before equity shares.
  2. Preference for Repayment of Capital: First right to get capital back during winding up.
  3. Fixed Return: The rate of dividend is pre-determined and fixed.
  4. Nature of Capital: It is safe capital provided by cautious investors.
  5. Market Value: Usually remains stable compared to equity shares.
  6. Voting Rights: They do not have normal voting rights; they vote only on matters affecting their interest.
  7. 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:
  1. Secured Debentures: Backed by a charge on company assets.
  2. Unsecured Debentures: No security is offered.
  3. Registered Debentures: Name of the holder is recorded in the Register of Debenture Holders.
  4. Bearer Debentures: Transferable by mere delivery; name not registered.
  5. Redeemable Debentures: Repaid after a specific period.
  6. Irredeemable Debentures: Repaid only at the time of winding up.
  7. Convertible Debentures: Can be converted into equity shares.
  8. 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:
  1. Promise: It is a written promise to repay a debt.
  2. Face Value: Usually has a high face value (e.g., ₹100 or multiples).
  3. Time of Repayment: The due date for principal repayment is specified.
  4. Interest: Fixed rate of interest is paid periodically, regardless of profit.
  5. Parties: Company, Trustees, and Debenture holders.
  6. Authority to Issue: Board of Directors has the power to issue debentures.
  7. Status of Holder: Debenture holder is a creditor of the company.
  8. 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.

  1. 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.
  2. 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

8) Explain briefly the different types of shares offered by a company to its existing Equity shareholders.
  1. 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.
  2. 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:

  1. Registration of Prospectus: A copy must be filed with the Registrar of Companies (ROC).
  2. Application Money: Must be at least 5% of the face value (or as specified by SEBI, typically 25%).
  3. Minimum Subscription: 90% of the issue size must be subscribed within 30 days of opening the issue.
  4. Closing of Subscription List: The list must be open for at least 3 working days and not more than 10.
  5. Basis of Allotment: Must be decided in consultation with the Stock Exchange.
  6. Oversubscription: Allotment must be pro-rata or as per SEBI guidelines.
  7. 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.
  1. No Voting Rights: Company cannot issue debentures with voting rights.
  2. Types: Can issue secured/unsecured, convertible/non-convertible debentures.
  3. Payment of Interest and Redemption: Must be done as per terms. Default leads to penalties.
  4. Debenture Certificate: Must be issued within 6 months of allotment.
  5. Debenture Redemption Reserve (DRR): Company must create DRR out of profits available for dividend.
  6. Appointment of Debenture Trustees: Mandatory if prospectus is issued to more than 500 people.
  7. 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.

Justify the following statements

1) Fixed capital stays in the business almost permanently.
Justification: Yes, this statement is correct.
  • Fixed capital is used to purchase fixed assets like land, building, machinery.
  • These assets are not sold frequently; they are used for production over a long period.
  • Therefore, the capital invested in them remains blocked in the business until the company winds up or the asset is scrapped.
2) Equity shareholders are real owners and controllers of company.
Justification: Yes, this statement is correct.
  • They provide permanent capital to the company.
  • They bear the ultimate risk of business (loss).
  • They have voting rights to appoint Directors and participate in management decisions.
  • Hence, they are the ultimate masters.
3) Bond holder is creditor of the company.
Justification: Yes, this statement is correct.
  • Bonds represent borrowed capital (loan) for the company.
  • Bond holders do not get ownership rights; they get a fixed interest.
  • They have a claim on assets for repayment before shareholders.
  • Their relationship is that of a lender (creditor) and borrower (company).
4) Equity share capital is risk capital.
Justification: Yes, this statement is correct.
  • Dividend is not guaranteed; it depends on profits.
  • If the company suffers losses, the capital value may erode.
  • In winding up, they are the last to be paid.
  • Since they bear the maximum financial risk, it is called risk capital.
5) The Board of Directors can refuse transfer of shares.
Justification: Yes, this statement is correct.
  • Though shares are transferable, the Board can refuse it under certain conditions prescribed in Articles.
  • Examples: If the transfer instrument is incomplete, stamp duty not paid, or if the transfer is against the company's interest.
  • A notice of refusal must be sent within 30 days.
6) A company has to create charge on its assets for issuing secured debentures.
Justification: Yes, this statement is correct.
  • Secured debentures mean debentures backed by security.
  • To provide security, the company must create a charge (mortgage/hypothecation) on its assets in favor of the Debenture Trustee.
  • This protects the interest of debenture holders in case of default.
7) All companies cannot accept deposits from public.
Justification: Yes, this statement is correct.
  • Private companies cannot accept deposits from the public; only from members/directors.
  • Only 'Eligible Public Companies' (having net worth > ₹100 Cr or turnover > ₹500 Cr) can accept deposits from the public.
  • Others can only accept from members.
8) Depository system results in reduced time, cost and efforts.
Justification: Yes, this statement is correct.
  • Transfers are electronic and instantaneous (reduced time).
  • No stamp duty on transfer, no courier charges (reduced cost).
  • No paperwork or physical handling of certificates (reduced effort).
9) Electronic holding of securities is safer than physical holding.
Justification: Yes, this statement is correct.
  • Physical certificates can be lost, stolen, torn, or mutilated.
  • Signatures can be forged in physical transfers.
  • In electronic (Demat) holding, these risks are eliminated as securities are held digitally by the Depository.
10) Dividend is paid out of profits of the company.
Justification: Yes, this statement is correct.
  • Dividend is a share of profit distributed to members.
  • Companies Act mandates that dividend can only be paid out of current year's profit (after depreciation) or accumulated free reserves.
  • It cannot be paid out of capital.
11) Interim dividend cannot be paid out of free reserves.
Justification: Yes, this statement is correct.
  • Interim dividend is declared between two AGMs.
  • It is paid out of the profits earned in the current financial year up to that quarter.
  • It cannot be paid from past accumulated reserves (Free Reserves), unlike Final Dividend.
12) Approval of members is not needed for Interim Dividend.
Justification: Yes, this statement is correct.
  • The power to declare Interim Dividend lies solely with the Board of Directors.
  • They declare it based on the profitability during the year.
  • Members' approval is required only for Final Dividend at the AGM.
13) Financial markets acts as link between investor and borrower.
Justification: Yes, this statement is correct.
  • Investors have surplus funds (savings).
  • Borrowers (Companies/Govt) need funds for projects.
  • Financial markets provide the platform/mechanism to channelize these savings into productive investments.
14) Capital market is useful for corporate sector.
Justification: Yes, this statement is correct.
  • Corporates need long-term funds for expansion, modernization, and new projects.
  • Capital market (Shares/Debentures) allows them to raise huge capital from the public.
  • It provides stability to their financial structure.
15) The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India.
Justification: Yes, this statement is correct.
  • SEBI was established to protect investor interests and regulate the market.
  • It frames rules for issuers, intermediaries, and stock exchanges.
  • It monitors compliance and penalizes malpractices like insider trading.
16) Stock exchanges work for the growth of the Indian economy.
Justification: Yes, this statement is correct.
  • They mobilize savings into productive industries.
  • They help in capital formation which leads to industrial growth.
  • They attract foreign investment (FII/FDI).
  • The Sensex/Nifty acts as a barometer of economic health.

Explain the following terms / concepts

  1. Fixed capital: Capital invested in fixed assets (land, machinery) intended for permanent use in business.
  2. Borrowed Capital: Capital raised by taking loans or issuing debentures/bonds. It is a debt.
  3. Overdraft: A credit facility given by banks to current account holders to withdraw more than their balance for a short period.
  4. Bonus shares: Free shares issued to existing equity shareholders out of accumulated profits.
  5. ESOS (Employee Stock Option Scheme): A scheme where employees are given an option to buy company shares at a future date at a pre-determined price.
  6. Rights Issue: Offering new shares to existing shareholders first, in proportion to their holding.
  7. Debenture certificate: A document issued by the company as evidence of holding debentures and debt.
  8. Credit rating: An evaluation of the creditworthiness (ability to repay debt) of a company by rating agencies (CRISIL, CARE).
  9. Secured Deposit: A deposit backed by a charge on tangible assets of the company.
  10. Correct information: The company secretary must provide factual and true information to members in correspondence.
  11. Dematerialization: Process of converting physical share certificates into electronic form.
  12. ISIN (International Securities Identification Number): A unique 12-digit alpha-numeric code that identifies a specific security (share/debenture).
  13. Interest: The price paid for the use of borrowed money.
  14. Interim Dividend: Dividend declared by the Board between two Annual General Meetings.
  15. Capital market: A market for long-term debt and equity capital.
  16. Working capital: Capital required for day-to-day operations (Current Assets - Current Liabilities).
  17. Owned capital: Capital provided by owners (Equity/Preference shares + Reserves).
  18. Transmission of shares: Transfer of title to shares by operation of law due to death, insolvency, etc.
  19. Allotment of shares: The act of appropriation (giving) of a certain number of shares to an applicant.
  20. ESPS (Employee Stock Purchase Scheme): Scheme where company offers shares to employees immediately (not future option) at a discounted price.
  21. Minimum subscription: The minimum amount (90% of issue) that must be raised for the IPO to be valid.
  22. Charge on assets: Creating a right on assets in favor of lenders (security) to recover dues in case of default.
  23. Eligible Public Company: A public company with Net Worth ≥ ₹100 Cr or Turnover ≥ ₹500 Cr, allowed to accept public deposits.
  24. Deposit Receipt: Acknowledgement issued by company proving receipt of money as deposit.
  25. Courtesy: Use of polite language in business correspondence to build goodwill.
  26. Rematerialization: Process of converting electronic holdings back into physical share certificates.
  27. Dividend: The portion of profit distributed to shareholders.
  28. Final Dividend: Dividend declared at the AGM for the completed financial year.
  29. Financial market: A marketplace where financial assets are created and traded.
  30. Stock exchange: An organized market for buying and selling existing securities.
HSC Board Exam Papers
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