Secretarial Practice: secretarial practice 12th commerce important questions

Secretarial Practice

Sample Paper of SP  – HSC Board Exam 2021  

Important Question

Q.1 A) A select the correct option ad rewrite the sentence                                                          [5]

  1. ……………… refers to capital made up of Equity and preference shares a) Share capital b) Debt capital               c) Reserve fund
  2. ………………is related to money and money management.  a) Production b) Marketing      c) Finance
  3. ……………..is the smallest unit in the total share capital of the company. a) Debenture b) Bonds              c) Share
  4. A company can issue ……………… convertible debentures. a) Only partly b) Only fully        c) Partly or fully
  5. The holder of preference share has the right to receive……………..rate of divided. a) fixed b) fluctuating     c) lower

Q.1 B) Match the pairs                                                                                 [5]

Group ‘A’Group ‘B’
a)Capital budgeting1)Sum of current assets
b)Fixed capital2)Deals with acquisition and use of capital
c)Working capital3)Fixed liabilities
d)Capital structure4)Sum of current liabilities
e)Corporate finance5)Fixed assets
6)Investment decision
7)Financing decision
8)Deals with acquisition and use of assets
9)Mix up of various sources of funds
10)Product mix

 Q.1 C) Give one word or phrase or term                                            [5]

  1. Offering of shares by a company to the public for the first time.
  2. A document of title of ownership of shares.
  3. The holders of these shares are entitled to participate in the surplus profit.
  4. Name the shareholders who participate in the management.
  5. Account to be created for the redemption of debentures.

Q.1 D) State True or False                                                 [5]             

  1. Equity share capital is known as venture capital.
  2. Equity shareholders enjoy a fixed rate of dividends.
  3. Only fully paid-up shares can be forfeited.
  4. Bondholders are owners of the company.
  5. Debenture holders have the right to vote at the general meeting of the company.



Q2. Explain the following terms/concepts (any4) [8]                          

  1. Borrowed Capital
  2. Employees Stock Option Scheme
  3. Debenture
  4. Renewal of Deposit
  5. Dematerialization

Q3. Study the following case/situation and express your opinion (Any 2)                             [6]

  1. The Balance-sheet of a Donald Company for the year 2018-19 reveals equity share capital of Rs. 25, 00,000, and retained earnings of Rs. 50, 00,000.
  1. Is the company financially sound?
  2. Can the retained earnings be converted into capital?
  3. What type of source retained earnings is?

2. The management of ‘Maharashtra State Road Transport Corporation’, wants to determine the size of working capital.

  1. Being a public utility service provider, will it need less working capital or more?
  2. Being a public utility service provider, will it need more Fixed Capital?
  3. Give one example of public utility service that you come across on a day-to-day basis.

3. Eva Ltd. Company’s capital structure is made up of 1, 00,000 Equity shares having a face value of ` 10 each. The company has offered to the public 40,000 Equity shares and out of this, the public has subscribed for 30,000 Equity shares. State the following in `.

  1. Authorised capital
  2. Subscribed capital
  3. Issued capital

Q4 Distinguish between (Any 3)                                                          [12]

  1. Fixed Capital and Working Capital.
  2. Transfer of Shares and Transmission of Shares
  3. Equity shares and Preference shares.
  4. Final Dividend and Interim Dividend

Q5. Answer in brief (Any 2)                                                                  [8]

  1. State any four factors affecting fixed capital requirements.
  2. What is Global Depository Receipt?
  3. State any four provisions of Companies Act 2013 for the issue of debentures.

Q6. Justify the following statement (Any 2)                                     [8]

  1. The firm has multiple choices of sources of financing.
  2. A company can issue a duplicate share certificate.
  3. Equity share capital is risk capital.
  4. Debenture trustees are appointed by a company issuing debentures.

Q7. Attempt the following (Letter Writing) (Any2)                      [10]

  1. Write a letter to the shareholder regarding the issue of Bonus Shares.
  2. Draft a letter of allotment to the debenture holder.
  3. Draft a letter of thanks to the depositor of a company.



Q8. Answer the following (Any 1)                                                        [8]

Define preference shares. What are the different types of preference shares?

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Q.1 A) A select the correct option ad rewrite the sentence [5]

  1. Company has to pay……………..to government. a) Taxes b) dividend         c) interest
  2. A company cannot issue ……………… with voting rights. a) Equity shares b) Debentures  c) Securities
  3. The accumulated dividend is paid to…………….preference shares. a) Redeemable b) cumulative    c) convertible
  4. ………………is offered to existing equity shareholders. a) IPO b) ESOS c) Rights Issue
  5. Deposit is a type of………………………………………….. a) Owned capital b) Short term loan           c) Long term loan

Q.1 B) Find the odd one                                                [5]

  1. ESOS, ESPS, Rights Shares, Sweat Equity.
  2. Secured Debentures, Convertible debentures, Irredeemable debentures.
  3. Bonus shares, Rights Shares, ESOS.
  4. Debenture Capital, Equity Share Capital, Preference Share Capital.
  5. Debenture, Public deposit, Retained earnings.
  6. Face value, Market value, Redemption value.

Q.1 C) Complete the sentences                                [5]

  1. Return on investment on debenture is called………………………
  2. Share capital refers to capital made up of Equity shares and………………………
  3. Initial planning of capital requirement is made by………………………
  4. The convertible preference shareholders have a right to convert their shares into…………
  5. Equity shareholders elect their representatives called…………………….. .

Q.1 D) Select the correct option from the bracket                            [5]

Group ‘A’Group ‘B’
a)Financing decision1)……………………………………………..
b)…………………………….2)Longer period of time.
c)Investment decision3)……………………………………………..
d)…………………………….4)Circulating capital
e)Combination of various

sources of funds

5)……………………………………………..

( To have right amount of capital, Deploy funds in systematic manner, Fixed capital, Working capital, Capital structure )

Group ‘A’Group ‘B’
a)Equity shares1)……………………………………………..
b)…………………………….2)Dividend at fixed rate
c)Debentures3)……………………………………………..
d)…………………………….4)Accumulated corporate profit
e)Public Deposit5)……………………………………………..

(Fluctuating rate of dividend, Preference shares, Interest at a fixed rate, Retained earnings,

Short-term loan. )

Q2. Explain the following terms/concepts (any 4)[8]

  1. Trade credit
  2. Initial Public Offer
  3. Debenture holders
  4. Depositor
  5. Financial market
  6. Commercial bills



Q3. Study the following case/situation and express your opinion (Any 2) [6]

  1. Satish is a speculator. He desires to take advantage of the growing market for the company’s product and earn handsomely.
  1. According to you which type of share Mr. Satish will choose to invest?
  2. What does he receive as a return on investment?
  3. State any one right which he will enjoy as a shareholder.

2. TRI Ltd. Company is a newly incorporated public company and wants to raise capital by selling Equity shares to the public. The Board of Directors is considering various options for this. Advise the Board on the following matters :

  1. What should the company offer – IPO or FPO?
  2. Can the company offer Bonus Shares to raise its capital?
  3. Can the company enter into an Underwriting Agreement?

3. A company is planning to enhance its production capacity and is evaluating the possibility of purchasing new machinery whose cost is ` 2 crore or has an alternative of machinery available on a lease basis.

  1. What type of asset is machinery?
  2. Capital used for the purchase of machinery is fixed capital or working capital?
  3. Does the size of a business determine the fixed capital requirement?

 Q4 Distinguish between (Any 3) [12]

  1. Share and Debenture.
  2. Final Dividend and Interim Dividend
  3. Primary market and Secondary market.
  4. Transfer of Shares and Transmission of Shares

Answer in brief (Any 2) [8]

  1. Discuss the importance of corporate finance.
  2. Explain the statutory provisions for allotment of shares.
  3. Explain briefly the procedure for the issue of debentures.

Q6. Justify the following statement (Any 2)        [8]

  1. There are various factors affecting the requirement of fixed capital.
  2. The company has to fulfill certain provisions while making the Right Issue.
  3. Preference shares do not carry any voting rights.
  4. All companies cannot accept deposits from the public.

Q7. Attempt the following (Letter Writing) (Any 2) [10]

  1. Draft a letter to the depositor regarding the repayment of his deposit.
  2. Write a letter to the member for the issue of the Share Certificate.
  3. Draft a letter to the debenture holder informing him about the redemption of debentures.



Q8. Answer the following (Any 1) [8]

  1. What is an equity share? Explain its features.

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Q.1 A) A select the correct option ad rewrite the sentence          [5]

  1. Bonus shares are issued free of cost to……………….  a) Existing Equity shareholders b) existing employees   c) Directors
  2. Letter of ……………… is sent to applicants who have been given shares by the company.  a) Regret b) Renunciation           c) Allotment
  3. Debenture holders are……………..of the company.  a) Creditors b) owners         c) suppliers
  4. ……………..are the creditors of the company. a) Shareholders b) Debenture holders   c) Directors
  5. The deposit can be accepted for a minimum of 6 months and a maximum for…….months a) 36 b) 3 c) 30

 Q.1 B) Answer in one sentences               [5]

  1. Define corporate finance.
  2. What is a share?
  3. What is a share certificate?
  4. Who are debenture holders?
  5. What is Public Issue?

 Q.1 C) Correct the underlined word and rewrite the following sentence              [5]

  1. Retained earnings are the external sources of finance.
  2. Preference shares get dividend at fluctuating
  3. Depository Receipt traded in the USA is called Global Depository Receipt.
  4. Issued capital is the maximum capital which a company can raise by issuing
  5. Government Company can accept deposit from

Q.1 D) Arrange in proper order                                  [5]

  1. a) Share certificate b) Allotment letter c) Application form
  2. a) Appoint Deposit Trustee. b) Hold General Meeting. c) Create charge on assets.
  3. a) Board Resolution b) Allotment of Debentures c) Board meeting
  4. a) Renewal of Deposit b) Acceptance of Deposits c) Deposit Receipt
  5. a) Gets Statement of Accounts b) Open Demat Account c) Submit DRF
  6. a) Recommendation of Dividend.  b)Checking sufficiency of profits c)Board Meeting

Q2. Explain the following terms/concepts (any 4)  [8]

  1. Ploughing back of profit
  2. Rights Issue
  3. Redemption of debentures
  4. Depository system
  5. Money market
  6. Treasury bills



Q3. Study the following case/situation and express your opinion (Any 2) [6]

  1. Rohit, an individual investor, invests his own funds in the securities. He depends on investment income and does not want to take any risk. He is interested in a definite rate of income and safety of principal.
  1. Name the type of security that Mr. Rohit will opt for.
  2. What does he receive as a return on his investment?
  3. The return on investment which he receives is fixed or fluctuating?

2. X owns 100 shares while Y owns 500 shares of Red Tubes Ltd. The company has asked all its shareholders to pay the balance unpaid amount of ` 20. X pays the full money demanded by the company. Y, who is in a bad financial position is unable to pay any money.

  1. Can the company forfeit the shares of Y?
  2. Can the company forfeit the shares of X?
  3. Can X transfer his shares?

3. Violet Ltd. Company plans to raise ` 10 crores by issuing debentures. The Board of Directors has some queries. Please advise them on the following

  1. Can the company issue unsecured debentures?
  2. Can they issue irredeemable debentures?
  3. As the company is offering debentures to its members, can such debentures have normal voting rights?

 Q4 Distinguish between (Any 3)               [12]

  1. Equity shares and Preference shares.
  2. Owned capital and borrowed capital.
  3. Initial Public Offer and Further Public Offer
  4. Money market and Capital market.

Q5. Answer in brief (Any 2)                         [8]

  1. Explain any 4 types of money market instruments
  2. State the features of Bonds.
  3. Explain the functions of the financial market.

 Q6. Justify the following statement (Any 2)                        [8]

  1. The bondholder is a creditor of the company.
  2. A company can issue only certain types of debentures.
  3. There is a limit or restriction on the amount that a company can collect as Deposits.
  4. There are certain circumstances when a secretary has to correspond with

Q7. Attempt the following (Letter Writing) (Any 2)         [10]

  1. Write a letter to the member for the payment of dividend through Dividend Warrant.
  2. Write a letter to the debenture holder regarding payment of interest electronically.
  3. Write a letter to the depositor regarding the renewal of his deposit.



Q8. Answer the following (Any 1) [8]

  1. What is Debenture? Discuss the different types of debentures.

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Secretarial Practice

Introduction to Corporate Finance

  1. The term finance is related to money and money management. It is related to the inflow and outflow of money. The success of any business organization depends upon the efficiency with which it is able to generate and use funds.
  2. Corporate finance deals with the raising and use of finance by a corporation. It deals with financing the activities of the corporation, capital structuring, and making investment decisions.
  3. The term corporate finance also includes financial planning, the study of the capital market, money market, and share market. It also covers capital formation and foreign capital. Even financial organizations and banks play a vital role in corporate financing.

The following two decisions are the basis of corporate finance.

  1. Financing Decision: The business firm has access to the capital market to fulfill its financial needs. The finance manager ensures that the firm is well capitalized i.e. they have the right amount of capital and that the firm has the right combination of debt and equity. The firm has multiple choices of sources of financing. The firm can choose whether it wants to raise equity capital or debt capital. The firm can even opt for bank loans, public deposits, debentures, etc. to raise funds.
  2. Investment Decision: It relates how the funds of a firm are to be invested into different assets, so the finance manager has to make decisions regarding the use of the funds in a systematic manner so that it will bring a maximum return for its owners. For this, the firm has to take into consideration the cost of capital. Once they know the cost of capital, the firm can deploy or use the funds in such a way that returns are more than the cost of capital.

IMPORTANCE OF CORPORATE FINANCE

  1. Helps in decision making: Every decision in the business is needed to be taken keeping in view of its impact on profitability. Most of the important decisions of business enterprises are determined on the basis of the availability of funds. A business organization can give a green signal to the project only when it is financially viable. Thus corporate finance plays a significant role in the decision-making process.
  2. Helps in Raising Capital for a project: Whenever a business firm wants to start a new venture, it needs to raise capital. A business firm can raise funds by issuing shares, debentures, bonds, or even by taking loans from the banks.
  3. Helps in Research and Development: Research and Development must be undertaken for the growth and expansion of the business. Research and Development is a lengthy process and therefore funds have to be made available throughout the research work. This would require continuous financial support. Many a time, Company has to upgrade its old product or develop a new product to attract the consumers. This company has to conduct surveys, market analyses, etc. which again requires financial support.
  4. Helps in the smooth running of the business firm: A smooth flow of corporate finance is needed so that salaries of employees are paid on time, loans are cleared on time, the raw material is purchased whenever required, sales promotion of existing products is carried out smoothly and new products can be launched effectively.
  5. Brings co-ordination between various activities: Corporate finance plays important role in the control and coordination of all activities in an organization. For e.g. Production will suffer if the finance department does not provide adequate finance for the purchase of raw materials and meeting other day-to-day financial requirements for the smooth running of the production unit. The efficiency of every department depends on effective financial management.
  6. Promotes expansion and diversification: Modern machines and modern techniques are required for expansion and diversification. Corporate finance provides money to purchase modern machines and technologies. Therefore finance becomes mandatory for the expansion and diversification of a company.
  7. Managing Risk: Company has to manage several risks, such as sudden fall in sales, loss due to natural calamity, loss due to strikes, etc. The company needs financial aid to manage such risks.
  8. Replace old assets: Assets such as plant and machinery become old and outdated over the years. They have to be replaced by new assets. Finance is required to purchase new assets.
  9. Payment of dividend and interest: Finance is needed to pay dividends to shareholders, interest to creditors, banks, etc.
  10. Payment of taxes/fees: Company has to pay taxes to the Government such as Income Tax, Goods and Service Tax (GST), and fees to the Registrar of Companies on various occasions. Finance is needed for paying these taxes and fees.

What is the factor that affects fixed capital?

Fixed capital is the capital that is used for buying fixed assets which are used for a longer period of time in the business. It stays in the business for a long period almost permanently.

Examples of fixed capital are – capital used for purchasing land and building, furniture, plant, and machinery, etc. Such capital is required usually at the time of the establishment of a new company. However, existing companies may also need such capital for their expansion and development, replacement of equipment, etc.

An entrepreneur obtains funds for the purchase of fixed assets from the capital market (Stock market). Funding can come from the issue of shares, debentures, bonds, or obtaining even long-term loans.

Factors affecting fixed capital requirement :

  1. Nature of business: Manufacturing industries and public utilities have to invest a huge amount of funds to acquire fixed assets. While a Trading business may not need huge investments in fixed assets.
  2. Size of business: Where a business firm is set up to carry on large-scale operations, its fixed capital requirements are likely to be high. It is because most of their production processes are based on automatic machines and equipment.
  3. Scope of business: There are business firms that are formed to carry on production or distribution on a large scale. Such businesses would require more amount of fixed capital.
  4. The extent of lease or rent: If an entrepreneur decides to acquire assets on the lease or on a rental basis, less amount of funds for fixed assets will be needed for the business.
  5. Arrangement of sub-contract: If the business wants to sub-contract some processes of production to others, limited assets are required to carry out the production. It would minimize the fixed capital requirement of the business.
  6. Acquisition of old assets: If old equipment and plants are available at low prices, then it would reduce the need for investment in fixed assets.
  7. Acquisition of assets on concessional rate: With the view to foster industrial growth at the regional level, the government may provide land and building, materials at concessional rates. Plants and equipment may also be made available on an installment basis. Such facilities will reduce the requirement of fixed assets.
  8. International conditions: This factor is very significant particularly in large organizations carrying business on an international level. For example, companies expecting a war may decide to invest large funds to expand fixed assets before there is a shortage of materials.
  9. The trend in the economy: If the future of the company is anticipated to be bright, it gives a green signal to business entrepreneurs to carry out all sorts of expansion of the business firms. In that case, a large amount of funds are invested in fixed assets so as to reap the benefits in the future.
  10. Population trend: When the population is increasing at a high rate, certain manufactures find this as an opportunity to expand the business. For example- the automobile industry, electronic goods manufacturing industry, ready-made garments, etc. necessitates a huge amount of fixed capital.
  11. Consumer preference: Industries providing goods and services which are in good demand, will require a large amount of fixed capital. For example – Mobile phone manufactures as well as mobile network providers.
  12. Competitive factor: This factor is a prime element in decision making regarding fixed capital requirements. If one of the competitor’s shifts to automation, the other companies in the same line of activity, will be compelled to follow that competitor.

What is the factor affecting working Capital?

Working capital is the capital that is used to carry out the day to day business activities. After estimating the fixed capital requirement of the business firm, it is necessary to estimate the amount of capital, that would be needed to ensure the smooth functioning of the business firm.

A business firm requires funds to store adequate raw material in stock. A firm would need capital to maintain sufficient stock of finished goods.

Factors affecting working capital requirement :

  1. Nature of business: Firms engaged in manufacturing essential products of daily consumption would need relatively less working capital as there would be constant and sufficient cash inflow in the firm to take care of liabilities. Likewise, public utility concerns have to maintain small working capital because of the continuous flow of cash from their customers. if the business is dealing with luxurious products, it requires a huge amount of working capital, as the sale of luxurious items is not frequent.
  2. Size of business: The size of the business also affects the requirement of working capital. A firm with large scale operations will require more working capital.
  3. The volume of sales: This is the most important factor affecting the size of working capital. The volume of sales and the size of working capital are directly related to each other. If the volume of sales increases, there is an increase in the amount of working capital and vice versa.
  4. Production cycle: The process of converting raw material into finished goods is called the production cycle. If the period of the production cycle is longer, then the firm needs more amount of working capital. If the manufacturing cycle is short, it requires less working capital.
  5. Business cycle: When there is a boom in the economy, sales will increase. This will lead to an increase in investment in stocks. This requires additional working capital. During a recession, sales will decline and hence the need for working capital will also decline.
  6. Terms of purchases and sales: If the firm does not get credit facility for purchases but adopts a liberal credit policy for its sales, then it requires more working capital. On the other hand, if credit terms of purchases are favourable and terms of credit sales are less liberal, then the requirement of cash will be less. Thus working capital requirements will be reduced.
  7. Credit control: Credit control includes factors such as the volume of credit sales, the terms of credit sales, the collection policy, etc. If the credit-control policy is sound, it is possible for the company to improve its cash flow. If credit policy is liberal, it creates a problem of the collection of funds. It can increase the possibility of bad debts. Therefore a firm requires more working capital. The firm making cash sales requires less working capital.
  8. Growth and Expansion: The working capital requirement of a firm will increase with the growth of a firm. A growing company needs funds continuously to support large scale operations.
  9. Management ability: The requirement of working capital is reduced if there is proper coordination between the production and distribution of goods. A firm stocking on heavy inventory calls for a higher level of working capital.
  10. External factors: If financial institutions and banks provide funds to the firm as and when required, the need for working capital is reduced.

What is capital structure?, Explain Components of Capital Structures

  • Capital structure constitutes two wards i.e. Capital and Structure. Capital refers to the investment of funds in the business and structure means the arrangement of different parts of the capital in proportion.
  • Once the capital requirement of a firm is decided, attention is given to various kinds of capital sources that can use to raise the funds to meet the requirements.
  • A company can raise its capital from different sources is Owned capital or borrowed capital or both.
    • The owned capital includes equity share + preference capital + reserve
    • The borrowed capital includes Loan + debentures + public deposits etc.

Components/parts of capital structures

There are four basic components of capital structure are follows:

  1. Equity share capital: It is the basic source of financing activities of business it represents the permanents capital of the company. The equity shareholder bears the ultimate risk. The equity shareholders get fluctuating dividends depending upon the profits. It enjoys normal rights.
  2. Preference share capital: The preference shareholder get preference for payment of dividend over the equity shareholders. Preference shares are those share which enjoys preference over equity share capital on the dividend. It does not enjoy normal voting rights.
  3. Retained earnings: It is an internal source of financing. It is nothing but ploughing back of profit. The company reserves part of the profit for self-financing.
  4. Borrowed funds:
  • Debentures: A debenture capital is a part of borrowed capital raised by the company. It provides long term finance. The company has to pay interest at an agreed rate.
  • Term loan: The term loans are provided by banks and other financial institutions. The term loans carry a fixed rate of interest.

Reference: Maharashtra State Bureau of Textbook Production

Secretarial Practice

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Q.2. Distinguish between the following: (Any three)                                     [15]

  1. Share and Debenture
  2. Equity share and preference share
  3. Transfer of share and transmission of share
  4. Share certificate and share warrant
  5. Interim dividend and final Dividend
  6. Primary Market and Secondary Market
  7. Fixed Capital and Working capital

Q.3. Write short notes on Any THREE of the following: [15]

  1. Renewal of Deposits
  2. Redemption of Debenture
  3. Share warrant
  4. Importance of financial planning
  5. Initial Public Offer (IPO)
  6. Global depository receipt
  7. Provisions regarding unpaid/ unclaimed dividend
  8. Acceptance of deposits.
  9. Retained profits.
  10. Employee Stock Option Scheme (E.S.O.S).
  11. Importance of Depository system.
  12. Bombay Stock Exchange.
  13. Capital structure and its components.
  14. Functions of stock exchange.
  15. Features of shares.
  16. Procedure for redemption of debentures.
  17. Statutory conditions of allotment of shares.
  18. Procedure for conversion of debentures.
  19. Methods of Redemption of Debentures.

Q.4 State with reasons, whether the following statements are True or False: (Any three) [15]

  1. The financial market contributes towards the nation’s economic growth and development.
  2. The bond holders are owners of the company.
  3. Depositor’s approval is must for renewal of deposit.
  4. A share certificate is a bearer document.
  5. Debentures are never redeemed by the company.
  6. Preference shareholders do not enjoy normal voting rights.
  7. Share certificate is a bearer document.
  8. Dividend can be paid on advance amount of calls received.
  9. Share transfer in depository mode is fast and economical.
  10. There are no legal provisions regarding payment of dividend.
  11. It is not possible to go ahead without a financial plan.
  12. A company can accept deposits repayable on demand.
  13. Share certificate is a bearer document.
  14. Handling demat shares is very time consuming.
  15. Convertible debentures can be converted into equity shares.
  16. Financial management is essential for all types of organizations.
  17. The bond holders are owners of the company.
  18. Transfer of shares is initiated by the company.
  19. Debenture holders are creditors of the company.
  20. Depositor’s approval is must for renewal of deposit.

Q.5. Attempt the following: (Any two)                                                                      [10]

  1. State the position of debenture holders in a company.
  2. Draft a letter of thanks to the depositor of a company.
  3. What are the factors affecting requirement of fixed capital?
  4. Draft a letter to a debenture holder informing him about redemption of debentures.
  5. Write a letter regarding payment of interest on debentures.
  6. Write the external factors influencing capital structure.
  7. Draft a letter to a depositor regarding repayment of his deposit.
  8. Write a letter to a debentureholder informing him about conversion of debentures into equity shares.
  9. Draft a letter to depositor for renewal of deposit.
  10. Draft a letter regarding payment of interest on debentures to the debenture holder.
  11. What are the points to be borne in mind by the secretary while writing letters to the members?
  12. What are the legal provisions regarding declaration of dividend?
  13. Write a letter regarding payment of interest on debentures.
  14. Draft a letter of thanks to the depositor of a company.
  15. What are the points to be borne in mind while writing letters to the members?
  16. State the preliminary steps in the issue of shares.

Q.6.                                                                                         [10]

  1. Write a letter to a shareholder regarding issue of bonus shares.
  2. Define “debenture” and explain the types of debentures.
  3. Define a preference share. Explain the different types of preference shares.
  4. Draft a letter of allotment of shares to the shareholder
  5. Define Equity Shares and explain its features.
  6. Define ‘preference shares’. Explain various types of preference shares.

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  1. Preference shareholders do not enjoy normal voting rights.

This statement is TRUE

  • Holders of preference share do not have normal voting rights like equity shares.
  • They can vote on any such matter which directly affects there interest as an investor.
  • Preference shareholders are preferred before equity shareholders to have their capital returned at the times of the liquidation of the business.
  • Taking a higher risk of losing capital, only equity shareholders are given voting rights.
  • The preference shareholders have voting rights in their class meetings only.

2. Bondholders are the owner of the company.

This statement is FALSE

  • A bond is an interest-bearing certificate issued by a government, semi-government, or business firm to raise capital.
  • The Bondholders are entitled to get a fixed rate of interest on the amount invested in Bonds.
  • It is paid compulsorily by the company even if profit is not earned.
  • The holders of such debt security become the creditors of the company and they have no rights to attend the general meeting and participate in management through voting rights.
  • Since bondholders are non – owners, they are not entitled to get dividend which is paid only to the owners of the company i.e., shareholders.
  • Hence, bondholders are not the owners of the company.

3. Public deposit is a good source for long-term finance.

This statement is FALSE

  • A public deposit is an important source of financing the short-term requirements of the company.
  • Companies generally receive a public deposit for the period ranging from 6 months to 36 months.
  • Under this method, the general public is invited to deposit their Savings with the company for varied periods.
  • Interest is paid by companies on such a deposit.
  • The rates of interest are higher than those allowed by commercial banks.
  • For the long term, the ownership capital company uses equity share capital.

4. A shares certificate is a bearer document.

This statement is FALSE

  • A share certificate is a written document prepared by the company under its common seals and send to the members, containing the number of shares held by him/her and the amount paid thereon.
  • The documents work as evidence for the owner of the shares of the shareholders.
  • It is not the same exact same as a share warrant.
  • It evidences the holding of so many shares by the person mention therein i.e., the shareholders
  • This renders is the non – negotiable but transferable document.

5. Transfer of shares is initiated by the company.

This statement is FALSE

  • When a member sells or given his shares to another person voluntarily, it is known as the transfer is shared.
  • The transfer of shares is a voluntary act on the parts of the shareholders.
  • The shares cannot be transferred by mere delivery.
  • The transfer has to be placed in the manner specified in this respect.
  • This transfer is effected by registering an instrument called ‘instrument of transfer’ with the company.

6.Debenture holders are the owner of the company

This statement is FALSE

  • A debenture is a loan taken by the company for medium to long periods.
  • Debenture holders, therefore, are the creditors of the company.
  • Debenture capital is returnable and therefore has no permanency.
  • Debenture holders earned interest has returned.
  • Hence Debenture holders are not the owners of the company.

7. A company cannot accept deposits payable on demand.

This statement is FALSE

  • A deposit is a short to medium-term long taken by a company for a certain period.
  • Pre-decided by the company and accept by the deposit.
  • It is always a term deposit with a maximum period of 36 months and a minimum of 6 months.
  • It is repayable after the fixed period.
  • So the public deposit of the company is not a demand deposit like current or savings bank account.

8. Depositor approval is a must for renewable deposits.

This statement is TRUE

  • On maturity of the deposit, of depositor may apply for renewable of the deposits the old deposit receipt is canceled and in that place, a new deposit receipt is issued without repaying deposit amount.
  • Usually, depositors expect safety and regular income in the form of interest on their investment.
  • If they are satisfied with the above condition, they get their deposits renewed for a further period.
  • This, if the depositors are willing and interested, the company can also renewal of deposit.
  • Hence, for depositors, approval is a must for the renewal of the deposit.

9. Handling demand shares is very time-consuming.

This statement is FALSE

  • Shares certificate, when converted from a physical form into an electronic form called Demat shares.
  • The depositor system eliminates the handling of huge paperwork involved in the transfer of securities.
  • Under this system, the securities are transferred by means of the entire ledger of the depository system without the physical movement of the security certificate.
  • Under the depository system, the process of Transfer of security is very simple and easy.
  • The transfer of securities from one investor to another under this system is virtually automatic, speedily and all hurdles of the transfer of securities are removed.

10. The rate of interim dividend is greater than the final dividend.

This statement is FALSE

  • The interim Dividend is the dividend that is declared between two annual general meetings of the company.
  • The final dividend is a dividend that is declared at the annual general meeting of the company.
  • The interim dividend is declared by the board by passing resolution if they are authorized by articles.
  • The final dividend is recommended by the board and declared by shareholders by passing an ordinary resolution at the annual general meeting.
  • Therefore the rate of interim dividend is less than the final dividend.

Secretarial Practice

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Reference: MHSB Books

Method of redemption of debenture

As the debenture is capital is borrowed capital it has to be paid back. The repayment of debenture amount to debenture holders is called the redemption of the debenture.

  1. BOARD MEETING: A board meeting is held, to finalize the procedure for redemption of the debenture. A resolution is approved of the meeting to redeem the debenture.
  2. INTIMATION ABOUT REDEMPTION TO DEBENTURE HOLDERS: Secretary has to send letters to debenture holders giving detail of redemption. He informs them to surrender the debenture certificate.
  3. REFUND: A secretary has to inform bankers to carry out the necessary steps to repay to debenture holders.
  4. CHANGE IN REGISTER TO DEBENTURE HOLDERS: After completion of the redemption procedure, the secretary notes down the details of redemption in the register in debenture holders.
  5. CHANGE IN REGISTER OF CHARGE: The charge created on assets in favour of the debenture holders is canceled and the register of charges is suitably modified.

Procedure of conversion of debentures

Joint-stock companies can be issued either non-conversion or convertible debenture. SEBI guidelines 2000 has given necessary provisions relating to convertible and non-convertible debenture.

  1. BOARD RESOLUTION: A resolution for the conversion is approved in the board meeting. The shares holders as well as the debenture holders’ approval for the taken for conversion. A special resolution is passed to that effect. A copy of the special resolution is filled with the registrar of companies within 30 days of its passing.
  2. LETTER OF OPTION: A letter of options is to be sent to debenture holders and one copy of the same is filed with SEBI. The secretary then verifies the contents send by debenture holders for conversion.
  3. ALLOTMENT OF SHARES: Debenture is convertible into equity shares. Notice of conversion is sent and Debenture holders are asked to return the debenture certificates. Secretary carries out the allotment of shares to debenture holders in due course.
  4. ENTRY IN REGISTER OF MEMBERS: Shares certificate is issued to holders and their names are entered in the registrar of members.
  5. FILLING OF RETURN OF ALLOTMENT: A return of allotment is filed with the register of the company within 30 days of allotment.

What is the legal provision regarding the declaration of dividends?

  1. Regulations 85 of Table A provides that the company may declare dividends it’s the general meeting.
  2. The rate of dividend shall not exceed the rate recommended by the board of directors.
  3. When the company fails to redeem redeemable preference shares within the specified period, the company shall not declare any dividend on its equity shares, so long as such failure continued.
  4. The company cannot declare dividends for last year in respect of which accounts are closed at the previous annual general meeting.
  5. The company cannot declare further dividends after the declaration of dividends at the annual general meetings.
  6. The dividend once declared cannot be canceled.

Feature of Shares

Meaning: Total share capital of a company is divided into many units of small denomination. each such unit is called shares.

Definition: According to sec 2(46) of the companies act 1956. Share is a share in the share capital of the company and includes stock except when is the distinction between stock and shares is expressed and implied.

  1. FACE VALUE: Each share has a definite face value say, RS 10, RS 25, RS 100 and so…The shares have a market value that may be more or less than the face value.
  2. ISSUE VALUE: A share may be issued at par (exact face value), at a premium (more than the face value), or at discount(less than the face value).
  3. PAID UP VALUE: shares may be fully paid – up or partly paid – up. A company can forfeit partly paid-up shares if calls on shares not paid in times.
  4. DISTINCTIVE NUMBER: Each share has a distinctive number. The shares are allotted in lots say, 10 shares, 50 shares, 100 shares, and so…
  5. OWNERSHIP: The owners of the shares are called shareholders or members of the company. The shareholders are the owner of the company.

Secretarial Practice

25 comments on “Secretarial Practice: secretarial practice 12th commerce important questions

  1. Sir please upload Notes on second chapter of SP Sources of corporate finance as soon as possible and Thank you so much for making very simple and very easy Notes

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    please reply me 🙏

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