SECRETARIAL PRACTICE -1- STANDARD 12TH

PREFACE

Dear Students,

There is hardly any book in the market which provides and

satisfies the actual requirements of the students at their 12 th STD
Examination of Secretarial Practice. Students of Secretarial Practice
face many problems due to improper selection of Books or Notes and
they score very less in this easiest subject. Keeping this main
problem in view, we have accordingly prepared these notes.

So we are here providing the exact solution on their problems.

We are very glad in presenting these notes for the practice purpose
of the students. Great care has been taken to provide a wide variety
of seen questions to cover each and every aspect of examination
which are not only interesting but also within the reach of the
students.

I am also thankful to My Students for their constant

encouragement to me. Last but not the least special thanks to my
Family and my wife Gitanjali Sinalkar and my two lovely angels
Manswi and Ojaswi without whose support it could be an impossible
task

We are confident that it will help you not only to get through but
also to secure maximum number of marks in Secretarial Practice.
Thus, it will be important to ensure your success through these
notes.
Suggestions for the improvement of these notes are welcome.

YOURS,
ADITYA SINALKAR.
DIRECTOR
YOGESHWAR ACADEMY

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -2- STANDARD 12TH

ABOUT AUTHOR
PROF. ADITYA SINALKAR HAS AN OUTSTANDING EDUCATIONAL
RECORD AND INDUSTRIAL EXPERINCE. GRADUATED IN COMMERCE FROM
PUNE UNIVERSITY, HE DID HIS DIPLOMA IN TAXATION LAW STANDING
FIRST IN NASIK DISTRICT IN ACCOUNTS. HE ALSO COMPLETED HIS
GOVERNMENT DIPLOMA IN CO-OPERATION AND ACCOUNTANCY. HE
TOPPED IN MERCANTILE LAW AND ACCOUNTS IN C.A.
FOUNDATION EXAM AT NASIK DISTRICT

HE PASSED HIS POST GRADUATION IN BUSINESS MANAGEMENT

SPECIALISING IN FINANCE IN FIRST CLASS WITH DISTINCTION IN
THE YEAR 2007 TOPPING IN THE UNIVERSITY’S TOPPERS. HE HAS ALSO
PASSED HIS MASTER IN BUSINESS STUDIES IN FIRST CLASS
TOPPING THE B.Y.K. COLLEGE. ALSO THE LAW GRADUATE HE
CONSISTENTLY SEEKS SOME NEW DEVELOPMENTS IN THE FIELD OF
EDUCATION.

HE WORKED WITH VARIOUS TAX CONSULTING FIRMS AND BANKING

SECTOR FOR MORE THAN 3 YEARS.

HE HAS TEACHING EXPERIENCE OF MORE THAN 20 YEARS

INVOLVING TEACHING EXPERIENCE TO POST GRADUATION AND
PROFESSIONAL COURSES LIKE M.COM., M.B.A., D.T.L. ETC.

HE ALSO ORGANISES VARIOUS SEMINARS AND LECTURES FOR THE

‘CAREER COUNSELLING, STRESS MANAGEMENT AND POSITIVE ATTITUDE
FOR THE BENEFITS OF STUDENTS’. HE ALSO CONTRIBUTES FOR THE
WELFARE OF STUDENTS.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -3- STANDARD 12TH

SYLLABUS
1. INTRODUCTION TO CORPORATE FINANCE

2. SOURCES OF CORPORATE FINANCE

3. ISSUE OF FORMATION

4. ISSUE OF DEBENTURES

5. DEPOSITS

6. CORRESPONDENCE WITH MEMBERS

7. CORRESPONDENCE WITH DEBENTURE HOLDERS

8. CORRESPONDENCE WITH DEPOSITORS

9. DEPOSITORY SYSTEM

10. DIVIDEND AND INTEREST

11. FINANCIAL MARKETS

12. STOCK EXCHANGE

FORMAT OF QUESTION PAPER

SECRETARIAL PRACTICE
(Revised course)
. Time : 3 Hrs Max. Marks : 80

Notes: (1) All questions are compulsory

(2) Figures to the right indicate full marks for the question.
(3) Figures to the left indicate question numbers.
(4) Answers to every question must be started on a new page.
(5) Draw figures and graphs wherever necessary
Q. NO. TOPICS CHOICE MARKS MARKS
WITH
OPTIONS
1. From the following types of sub question any
FOUR WILL BE ASKED
A) Select the correct option and rewrite the sentence 5 5 5

B) Match the pairs 5 5 5

C) Give one word or phrase or term 5 5 5
D) State true or False 5 5 5
E) Find the odd one 5 5 5
F) Complete the Sentence 5 5 5
G) Select the correct option from the bracket 5 5 5
H) Answer in one sentence 5 5 5
I) Correct the underlined word and rewrite the 5 5 5
following sentence
J) Arrange in proper order 5 5 5
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -4- STANDARD 12TH

2. Explain the following terms/concepts (4 out of 6) 8 12

3. Study the following case/situation and express your (2 out of 3) 6 9

opinion

4. Distinguish Between (3 out of 4) 12 16

5. Answer in Brief (2 out of 3) 8 12

6. Justify the following statements (2 out of4) 8 16

7. Attempt the following (Letter Writing) (2 out of 3) 10 15

8 Answer the following (Long Answer) (1 out of2) 8 16

Total Marks : 80 116

FORMAT OF QUESTION PAPER

(Application based Test Patten)
Q. NO. TOPICS MARKS
1. Correct the underlined word and rewrite the 4
following sentences
2. Complete the sentence 4

3. Find the Odd One (OR) Arrange in Proper 3

Order
4. Study the following case/situation and express 9
your opinion
Total 20
UNITWISE WEIGHTAGE
UNIT UNIT CHAPTER MARKS MARKS
NO. NO. WITH
OPTION
1. SOURCES OF CORPORATE FINANCE 1 AND 2 17 25
2. CAPITAL RAISING 3, 4 AND 5 24 35
3. SECRETARIAL CORRESPONDENCE 6, 7 AND 8 13 18
4. DEPOSITORY SYSTEM 9 07 11
5. PAYMENT OF DIVIDEND AND INTEREST 10 09 13
6. FINANCIAL MARKET 11 AND 12 10 14
TOTAL 80 116

PERFORMANCE EVALUATION
NO. PARTICULARS STANDARD ACTUAL TARGETED
1. INTRODUCTION TO CORPORATE FINANCE 3 DAYS
2. SOURCES OF CORPORATE FINANCE 5 DAYS
3. ISSUE OF SHARES 4 DAYS
4. ISSUE OF DEBENTURES 3 DAYS
5. DEPOSITS 2 DAYS
6. CORRESPONDENCE WITH MEMBERS 2 DAYS
7. CORRESPONDENCE WITH DEBENTURE 2 DAYS
HOLDERS
8. CORRESPONDENCE WITH DEPOSITORS 2 DAYS
9. DEPOSITORY SYSTEM 3 DAYS
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -5- STANDARD 12TH
10. DIVIDEND AND INTEREST 3 DAYS
11. FINANCIAL MARKETS 3 DAYS
12. STOCK EXCHANGE 3 DAYS

IMP *marked questions are from the Board Text Book

CHAPTER 1. INTRODUCTION TO CORPORATE FINANCE

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Discuss the importance of Corporate Finance?

Ans. CORPORATE FINANCE : MEANING
Corporate finance deals with the raising and using of finance by a corporation. It deals with financing the
activities of the corporation, capital structuring and making investment decisions.
MEANING : DEFINITION
Henry Hoagland expresses the view that ‘‘corporate finance deals primarily with the acquisition and use of
capital by business corporation.’’
The term corporate finance also includes financial planning, study of capital market, money market and share
market. It also covers capital formation and foreign capital. Even financial organisations and banks play vital role in
corporate financing.
IMPORTANCE OF CORPORATE FINANCE :
In the functional management of business enterprise, importance is given to production, finance, marketing
and personnel activities. Among all these activities, utmost importance is given to financial activities. The importance
of corporate finance may be discussed as follows –
1) Helps in decision making : Most of the important decisions of business enterprise are determined on the
basis of availability of funds. It is difficult to perform any function of business enterprise independently without
finance.
Every decision in the business is needed to be taken keeping in view of it’s impact on profitability. There may
be number of alternatives but the management is required to select the best one which will enhance profitability.
Business organisation can give green signal to the project only when it is financially viable. Thus corporate finance
plays significant role in 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. 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 business. Detailed technical work is essential for the execution of projects. Research and
Development is lengthy process and therefore funds have to be made available through out the research work. This
would require continuous financial support.
Many a time, Company has to upgrade its old product or develop new product to attract the
consumers. For this company has to conduct survey, market analysis, etc. which again requires financial support.
4) Helps in smooth running of business firm : A smooth flow of corporate finance is needed so that salaries
of employees are paid on time, loans are cleared on time, 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 significant role in control
and co-ordination of all activities in an organisation. For e.g. Production will suffer, if finance department does not
provide adequate finance for the purchase of raw materials and meeting other day-to-day financial requirements for
smooth running of production unit. Due to this, sales will also suffer and consequently the income of concern as well
as rate of profit will be affected. Thus efficiency of every department depends upon the 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 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. 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 dividend to shareholders, interest to
creditors, banks, etc.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -6- STANDARD 12TH
10) Payment of taxes/fees : Company has to pay taxes to Government such as Income Tax, Goods and Service
Tax (GST) and fees to Registrar of Companies on various occasions. Finance is needed for paying these taxes and
fees.\

*II) What is fixed capital? State factors affecting requirement of fixed capital.
Ans.*Fixed Capital *
Fixed capital is the capital which is used for buying fixed assets which are used for a longer period of time in
the business. These assets are not meant for resale.
In simple words fixed capital refers to capital invested for acquiring fixed assets. It stays in the business
for long period almost permanently. Examples of fixed capital are - capital used for purchasing Such capital is
required usually at the time of establishment of a new company. However, existing companies may also need such
capital for their expansion and development, replacement of equipments, etc.
Initial planning of fixed capital requirement is made by company’s promoters. For this, they first prepare a list
of fixed assets needed by the company and cost of these assets is estimated. They collect information regarding
price of land, cost of construction of building, cost of plant and machinery, etc. The cost of different fixed assets is
calculated and the resulting figure would be the total of fixed capital requirement of a new firm.
In recent years, estimating fixed capital requirement has assumed great importance particularly because of
modern industrial processes which require increased use of heavy and automated machineries.
An entrepreneur obtains funds for the purchase of fixed assets from capital market. Funding can come from
issue of shares, debentures, bonds or obtaining even long term loans.
Factors Affecting requirements of Fixed Capital
1. Nature of Business : Manufacturing industries and public utilities have to invest huge amount of funds to
acquire fixed assets. While 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 equipments.
3) Scope of business : There are business firms which are formed to carry on production or distribution on a
large scale. Such businesses would require more amount of fixed capital.
4) Extent of lease or rent : If entrepreneur decides to acquire assets on lease or on 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 minimise fixed capital requirement of business.
6) Acquisition of old assets : If old equipments 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 regional level,
the government may provide land and building, materials at concessional rates. Plants and equipments may also be
made available on instalment basis. Such facilities will reduce the requirement of fixed assets.
8) International conditions : This factor is very significant particularly in large organisations carrying business on
international level. For example : companies expecting war, may decide to invest large funds to expand fixed assets
before there is shortage of materials.
9) Trend in economy : If the future of the company is anticipated to be bright, it gives green signal to
business entrepreneur to carry out all sorts of expansion of business firm. In that case, large amount of funds are
invested in fixed assets so as to reap the benefits in future.
10) Population trend : When the population is increasing at high rate, certain manufactures find this as an
opportunity to expand business. For example- automobile industry, electronic goods manufacturing industry, ready-
made garments, etc. which necessitates huge amount of fixed capital.
11) Consumer preference : Industries providing goods and services which are in good demand, will require
large amount of fixed capital. For example - Mobile phone manufactures as well as mobile network providers.
12) Competitive factor : This factor is 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.
13) Growth and Expansion : A growing firm may need to invest money in fixed assets in order to maintain its
growing production and turnover.
14) Stage of development of business : The requirement of fixed capital for a new undertaking is greater than that of
an established business.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -7- STANDARD 12TH
15) Business cycle : When there is boom period in the economy, additional investment in permanent assets may be
made by firm to increase their production capacity. So the need of fixed capital increases

*III) What is working capital? State factors affecting requirement of working capital.
Ans. *Working Capital*
Working capital is the capital which is used to carry out the day to day business activities. After estimating
fixed capital requirement of the business firm, it is necessary to estimate the amount of capital, that would be needed
to ensure 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. In actual practice goods are sold out in
cash or on credit. Goods sold on credit do not fetch cash immediately. Firm will have to arrange for funds till the
amount is collected from the debtors. Cash is also required to pay overheads. Since uncertainty is always a feature of
business, some excess cash also should be maintained to meet unexpected expenses.
Thus, a business firm will have to arrange capital for the following :
a) For building up inventories b) For financing receivables c) or covering day-to-day operating expenses.
The capital invested in these assets is referred to as ‘Working capital’. The concept of working capital is
viewed differently by leading authorities. Some authorities consider working capital as equivalent to excess of
current assets over current liabilities. Gerstenbergh, defines it as, ‘‘The excess of current assets over current
liabilities.’’ This approach refers to ‘Net Working Capital’. Gerstenbergh does not call it as working capital. He
prefer to call it as ‘circulating capital’.
Other authorities viewed working capital equivalent to current assets. According to J. S. Mill, “The sum of
current assets is working capital.” This approach has broader application. It takes into consideration all current
assets, of the company. It refers to ‘Gross Working Capital’.
Factors affecting working capital requirement :
There is no precise standards to measure working capital adequacy. Management has to determine the size of
working capital in the light of certain aspects of business firm and economic environment within which the firm
operates.
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 continuous flow of cash
from their customers.
On the contrary, if the business is dealing in luxurious products, it requires huge amount of working capital,
as sale of luxurious items are not frequent. Trading/merchandising firms which are concerned with distribution of
goods have to carry big inventories of goods to meet customer’s demand and have to extend credit facilities to attract
customers. Hence they need large amount of working capital.
2) Size of business : The size of business also affects the requirement of working capital. A firm with large scale
operations will require more working capital.
3) Volume of sales : This is the most important factor affecting size of working capital. The volume of sales and
size of working capital are directly related with each other. If volume of sales increases, there is an increase in the
amount of working capital and vice a versa.
4) Production cycle : The process of converting raw material into finished goods is called production cycle. If
the period of production cycle is longer, then firm needs more amount of working capital. If 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 increase in
investment in stocks. This requires additional working capital. During recession, sales will decline and hence the need
of working capital will also decline.
6) Terms of purchases and sales : If the firm does not get credit facility for purchases but adopts 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 credits sales are less liberal, then
requirement of cash will be less. Thus working capital requirement will be reduced.
7) Credit control : Credit control includes the factors such as volume of credit sales, the terms of credit sales, the
collection policy, etc. If credit control policy is sound, it is possible for the company to improve it’s cash flow. If
credit policy is liberal, it creates a problem of collection of funds. It can increase possibility of bad debts. Therefore a
firm requires more working capital.
The firm making cash sales requires less working capital.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -8- STANDARD 12TH
8) Growth and Expansion : The working capital requirement of a firm will increase with 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 co-ordination between
production and distribution of goods. A firm stocking on heavy inventory calls for higher level for 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.
11) Requirement of cash : Business require cash for different purposes. If business requires more cash, more
working capital is needed.
12) Seasonal Fluctuations : During certain season more working capital is required for e.g. for seasonal goods like
umbrella, raincoat etc. in order to keep ready stock before rainy season business require maximum working capital.

Q.2 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Define Capital Structure and state its components.

Ans. *CAPITAL STRUCTURE*
A company can raise its capital from different sources. i.e. owned capital or borrowed capital or both. The
owned capital consists of equity share capital, preference share capital, reserves and surplus. On the other hand,
borrowed sources are debentures, loans, etc. A combination of different sources are used in capital structure. It is
nothing but ‘security mix.’
Definition
R. H. Wessel : “ The long term sources of funds employed in a business enterprise”.
John Hampton : “A firm’s capital structure is the relation between the debt and equity securities that makes up the
firm’s financing of it’s assets”.
Capital structure means mix up of various sources of funds in desired proportion. It means ‘financing mix’
which refers to the proportion of different securities raised by a firm for long term finance.
Capital structure = amount of equity shares + amount of preference shares + reserves + amount of debentures.
Components i.e. parts of capital structure
a) Equity share capital : It is main source of financial activities of business. Equity shareholders are part owners of
the company. they are risk bearers as their dividend depends upon company’s profit. Their capital is returned only at
the time of winding up of the company.
b) preference share capital : these shareholders get dividend at fixed rate and have priority over equity shares in
return of capital and payment of dividend.
c) Retained earning : part of total profit is kept aside and accumulated in ‘reserves’. It is retained earning. It is
internal source of financing. It is also known as capitalization of profit/ploughing back of profit.
d) Borrowed capital : It includes debentures and term loans
i) Debentures : it is an acknowledgement of loan raised by a company by issuing debentures. Company pays fixed
interest at pre decided rate to debenture holders. They are refunded on expiry of period.
ii) Term loan : Term loan i.e. short term, long term and medium term loans are provided by banks and other financial
institutions. They carry fixed rate of interest. Interest rate varies with the period and amount of loan.

*II) What is Corporate Finance and State two decisions which are basic of corporate finance? (OR)
Write short note on : Corporate Finance
Ans. CORPORATE FINANCE : MEANING
Corporate finance deals with the raising and using of finance by a corporation. It deals with financing the
activities of the corporation, capital structuring and making investment decisions.
MEANING : DEFINITION
Henry Hoagland expresses the view that ‘‘corporate finance deals primarily with the acquisition and use of
capital by business corporation.’’
The term corporate finance also includes financial planning, study of capital market, money market and share
market. It also covers capital formation and foreign capital. Even financial organisations and banks play vital role in
corporate financing.
The following two decisions are the basis of corporate finance.
a) Financing Decision : The business firm has access to capital market to fulfill it’s financial needs. The firm
has multiple choices of sources of financing. The firm can choose whether it wants to raise equity capital or debt
capital. Firm can even opt for bank loan, public deposits, debentures etc. to raise funds. The finance manager ensures
that the firm is well capitalised i.e. they have right amount of capital and that the firm has right combination of debt
and equity.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE -9- STANDARD 12TH
b) Investment Decision : Once the business firm has gained access to capital, the finance manager has to take
decision regarding the use of the funds in systematic manner so that it will bring 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, firm can deploy or
use the funds in such a way that returns are more than cost of capital.
Finding investments and deploying them successfully in the business is known as investing decision. It is also
called as ‘capital budgeting’.

*III) Write a short note on Capital Requirements

Ans. When a business entrepreneur imagines an idea of setting up a business enterprise, the commercial possibility
of the idea is investigated. Once the entrepreneur is satisfied with the feasibility of the project, serious steps are taken
to start the project. The first and foremost step is to take decision on the amount of capital requirement to start and
run the business. This task has to be performed with utmost care. Therefore financial plan should be drafted keeping
in mind present and future requirement of the business. Thus while deciding about the volume of capital requirement,
an entrepreneur has to take into consideration - fixed capital requirement and working capital requirement

*IV) State any four factors affecting fixed capital requirements?

Ans. Refer to Q. 1(II)

*V) Write short note on Working Capital?

Ans. Refer to Q. 1(III)

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Corporate finance deals with the raising and using of finance by business corporation
Reasons : a) The business organizations require finance to start or expand its business. B) The finance manager
should ensure the finance required by the firm. C) The right sources of fund should be identified that have
minimum cost. D) the funds raised must be utilized effectively.
Thus, it is rightly said that, corporate finance deals with the raising and using of finance by business
corporation.

*II) The firm has multiple choices of sources of financing

Reasons : a) Business firms require finance in terms of working capital and fixed capital b) Funds are required
at different stages of business. C) Company can raise funds from various sources i.e. from internal and external
sources. D) Internal sources could be cash inflows on sales turnover, income from investments and retained
earnings. E) External sources can be obtained for short term requirements through cash credit, overdraft, trade
credit, discounting bills of exchange issue of commercial paper etc. f) For long term needs, a firm can meet their
financing needs through issue of shares, debentures, bonds, public deposits etc.
Thus, it is rightly said that, the firm has multiple choices of sources of financing

*III) Fixed capital stays in the business almost permanently

Reasons : Factors determining fixed capital requirements are
a) Fixed capital refers to capital invested for acquiring fixed assets b) These assets are not meant for resale c)
Fixed capital is capital used for purchasing and building, furniture, plant and machinery etc. d) Such capital is
usually required at the time of establishment of a new company e) Existing companies may also need such
capital for their expansion and development, replace of equipments etc. f) Modern industrial process require
increased use of heavy automated machinery etc.
thus, it is rightly said that, fixed capital stays in the business almost permanently.

*IV) There are various factors affecting the requirements of fixed capital
Reasons : a) Fixed capital being long term capital is required for development and expansion of the company.
B) The nature and size of business have great effect on fixed capital. Manufacturing business requires huge fixed
capital whereas trading organization like retailers require less fixed capital c) Methods of acquiring assets on
rentals or on least or installment basis will require less amount of fixed assets. D) If fixed assets are available at
low prices and concessional rates then it would reduce the need for investment in fixed assets. E) International
conditions and economic trends like a boom period will require high investment in fixed assets and a recession will
lead to less requirements. F) similarly, consumer preference, competition and highly demanded goods and
services will require large amount of fixed capital. E.g. mobile phones.
Thus, it is rightly said that, there are various factors affecting the requirements of fixed capital.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 10 - STANDARD 12TH
V) Working capital is also called as circulating capital
Reasons : a) working capital is required by the business to carry out day to day transactions. B) Working capital
helps the firm to maintain sufficient stock of raw material stock and finished goods. C) Working capital can be
funded with short term loans, deposits, trade credit etc. d) It also helps the business to meet the unexpected
expenses.
Thus, it is rightly said that Working Capital is also called as circulating capital

*VI) There are various factors affecting the requirement of working capital
Reasons : a) The nature and size of business affect the requirement of working capital. Trading or merchandising
firms and big retail enterprises need large amount of capital compared to small firms which need small amount of
working capital. B) If the period of production cycle is longer than firm needs more amount of working capital.
If manufacturing cycle is short, it requires less working capital. C) During book period sales will increase leading
to increasing investment in stocks, thus requiring additional working capital and during recession it is vice versa.
D) Along with expansion and growth of the firm or company in terms of sales and fixed assets, the requirement of
working capital increases. E) If there is proper co-ordination, communication and co-operation between
production and sales department then requirement of working capital is less. G) a liberal credit policy increase
the possibility of bad debts and in such cases the requirement of working capital is high, whereas a firm making cash
sales requires less working capital.

*VII) Capital structure is composed of owned funds and borrowed funds.

Reasons : a) Capital structure means mix up of various sources of funds in desired proportion. B) To decide
capital structure means to decide upon the ratio of different types of capital. C) a firms capital structure is the
relation between the debt and equity securities that makes up the firms financing of its assets. D) The capital
structure is composed of owned funds which include share capital, free reserve, and surplus and borrowed funds
which represent debentures, bank loans and long term loans provided by financial institutions e) Thus capital
structure = Equity share capital + preference share capital + reserves + debentures
Thus, it is rightly said that, capital structure is composed of owned funds and borrowed funds.

Q.4 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) FIXED CAPITAL AND WORKING CAPITAL(Oct 14) (Mar 15)

POINT FIXED CAPITAL WORKING CAPITAL
1. Meaning Any kind of physical or real capital i.e.. The excess of current assets over current liabilities is
fixed asset is fixed capital. It is that working capital. It if firm’s investment is short term
portion of total capital which is invested in asset i.e. cash or short term securities.
fixed asset.
2. Nature Fixed capital is almost permanent in Working capital is circulating capital. It is for short
business i.e. for at least more than one period.
accounting year.
3. Purpose Fixed capital is invested in fixed assets like Working capital is invested in short term assets as
land, building, equipments etc. which is cash, bills receivable, inventory etc.
not used for production of goods.
4. Sources Fixed capital is raised through selling Working capital can be funded with short term loans,
shares, debentures, long term loans, bonds deposits, trade, credit etc.
etc.
5. Objective of Investor invests money in fixed capital in To get immediate return, investor invests in working
investor order to make future profit. Investor may capital. Investor gets comparatively less return.
get good return on his investment.
6. Risk Risk involved in investing fixed capital is Investment in working capital is less risky.
Involved more and for long period.
7. Examples Land, building, plant and machinery. Cash, bills receivable, inventory, cash at bank.
8. Decisions Decisions relating to fixed capital Decisions relating to working capital needs are
investment are generally made by top level generally made by middle level or lower level
management e.g. cash, bills receivable, management.
inventories, cash at bank

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 11 - STANDARD 12TH

*I) The management of ‘Maharashtra State Road Transport Corporation’ wants to determine the size of
working capital.
A) Being a public utility service provider will it need less working capital or more?
Ans. MSRTC being a public utility service provider, will need less working capital because of continuous flow of
cash from their customer thus liabilities are taken care of.
B) Being a public utility service provider, will it need more fixed capital?
Ans. Being a public utility service provider MSRTC will need huge amount of funds to acquire fixed assets thus it
will need more fixed capital.
C) Give one example of public utility service that you come across on day to day basis.
Ans. The Indian Railways.

*II) A company is planning to enhance its production capacity and its evaluating the possibility of purchasing
new machinery whose cost is Rs. 2/- crore or has alternative of machinery available on lease basis.
A) What type of asset is machinery?
Ans. Machinery is fixed asset
A fixed asset may be held for 5, 10 or 20 years and more. But if assets are acquired on lease or rental basis,
then less amount of funds for fixed assets will be need for business.
B) Capital used for purchase of machinery is fixed capital or working capital.
Ans. Capital used for purchase of machinery is fixed capital.
C) Does the size of a business determine the fixed capital requirement?
Ans. Yes, where a business firm is set up to carry on large scale operations, its fixed capital requirements are likely to
be high.

III) Pilatus company manufacturers sophisticated aeroplanes whereas whitewood company produces plastic
items, stationery products, packed food items etc. and is labour intensive..
A) Determine their amount and composition of capital requirement ?
Ans. Pilatur company being a manufacturer of sophisticated products like aeroplanes it will need more fixed
capital. Firms which make use of sophisticated products, technology require huge investment in fixed assets.
B) Whitewood company being labour intensive, will it need more of working capital
Ans. Companies that are labour intensive which do not make use of latest technology may require less investment in
plant and machinery, fixed assets. They require more of working capital to pay salaries and other related expenses..
C) Does the type of product manufactured and technology used, determine fixed capital or working capital
requirement?
Ans. Yes, type of product and technology used determine fixed capital. Firms manufacturing sophisticated items like
aeroplanes definitely require more fixed capital compared to those companies who produce plastic items, stationery
products etc.

iv) Peach line is an online seller of apparels and Ceramol is a manufacturing tableware and exclusive
dinnerware. What is their capital need
A) Being an online seller, will it need more or less working capital?
Ans. Online sellers required limited employee and inventory and so, it will require lower amount of working
capital.
B) Ceramol being a manufacturer of tableware will it need more of fixed capital?
Ans. No, Ceramol being a manufacturer of tableware may need more working capital as it has to pay wages to
employees and also payment to supplier, maintenance of machine, rent and other expenses.
C) Does the nature of Business determine the working capital requirement?
Ans. Yes, Peach line seller is selling routine consumption products like apparels, would need less working capital.
Ceramol, dealing in luxurious tableware, requiring huge working capital as sale of such items are not frequent.

Q.6 EXPLAINT HE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Financing Decision

Ans. Financing decision is the right decision that is made by a finance manager of any corporation ensuring that the
firm is well cpaitalised with the right combination of debt and equity, having access to multiple choices of sourcing of
finance.
*II) Investment Decision
Ans. Investment decisions means capital budgeting i.e. finding investments and using them successfully in the
business for greater profits
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 12 - STANDARD 12TH

*III) Fixed Capital

Ans. Fixed capital is the capital which is used for buying the fixed assets which are used for longer period of time in
the business. These assets are not meant for resale. Examples of fixed capital is capital used for purchasing land and
building, furniture, plant and machinery etc.

*IV) Working capital

Ans. Working capital is the capital which is used to carry out the day to day business activities. It takes into
consideration all currents assets, of the company. It also refers to ‘Gross Working Capital. Examples of working
capital are Inventory, Financing Receivables, Covering day to day operation expenses.

*V) Equity Share capital

Ans. It is the basic source of business finance which carry no preference regarding rate of dividend, i.e. its fluctuating
and repayment of capital during winding up. They bear ultimate risk with ownership and have residual claim during
winding up.

VI) Preference share capital

Ans. Preference shares carry preferential right as to payment of dividend and have priority over equity shares for
return of capital during liquidation (winding up). These share carry dividend at fixed rate.

VII) Debenture
Ans. It is borrowed capital, an acknowledgement of loan raised by company. Company has to pay interest on
debenture at an agreed rate.

Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) ………….said that money is an arm or leg- use it or lose it
a) Henry Hoagland b) Henry Ford c) Henry fayol
*2) .................. is related to money and money management.
a) Production b) Marketing c) Finance
*3) Finance is the management of ................. affairs of the company.
a) monetary b) marketing c) production
*4) Corporation finance deals with the acquisition and use of by business corporation.
a) goods b) capital c) land
5) Investing decision is also called as………..
a) corporate finance b) Capital requirement c) capital budgeting
*6) Company has to pay ................. to government.
a) taxes b) dividend c) interest
*7) ................. refers to any kind of fixed assets.
a) Authorised capital b) Issued capital c) Fixed capital
*8)................. refers to the excess of current assets over current liabilities.
a) Working capital b) Paid-up capital c) Subscribed capital
9) Manufacturing industries have to invest…………amount of funds to acquire fixed assets.
a) huge b) less c) minimal
*10) When the population is increasing at high rate, certain manufacturers find this as an opportunity to
…….business.
a) close b) expand c) contract
*11) The sum of all ................. is gross working capital.
a) expenses b) current assets c) current liabilities
*12) ………….means mix up of various sources of funds in desired proportion
a) capital budgeting b) capital structure c) Capital goods
13) equity share capital vary………………rate of dividend
a) fluctuating b) fixed c) economical
14) Preference share capital carry………….rate of dividend.
a) fluctuating b) fixed c) economical
15) Retained earning is…………….source of financing
a) External b) Internal c) Capital
16) ……….is acknowledgement of loans raised by company
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 13 - STANDARD 12TH
a) share capital b) Corporate Finance c) Debentures

Q.8 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Capital budgeting a) Sum of current assets
2) Fixed capital b) Deals with acquisition and use of capital
3) Working capital c) Fixed liabilities
4) Capital structure d) sum of current liabilities
5) Corporate finance e) Fixed assets
f) Investment decision
g) Financing decision
h) Deals with acquisition and use of assets
i) Mix up of various sources of funds
j) Product mix
Ans. (1-f),(2-e),(3-a),(4-i),(5-b)

*2) A GROUP B GROUP

1) Finance a) Fixed rate of dividend
2) Equity share capital b) Acknowledgement
3) Preference shares capital c) Fluctuating rate of dividend
4) Retained Earning d) Term loan
5) Borrowed Capital e) Financing decision
f) money and money management
g) Ploughing back of profits
h) Investing decision
i) Day to day transactions
j) Raising and Utilisation of finance
Ans. (1-f),(2-c),(3-a),(4-g),(5-d)

Q.9 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1) A key determinant of success of any business function.
*2) The decision of finance manager which ensures that firm is well capitalised.
3) The firms concerned with buying and selling without altering physical form of goods.
*4) The decision of finance manager to deploy the funds in systematic manner.
*5) Capital needed to acquire fixed assets which are used for longer period of time.
6) Indirect cost or expenses required to run business
*7) The sum of current assets.
*8) The excess of current assets over current liabilities.
9) They maintain small working capital because of continuous cash flow from customers
*10) The process of converting raw material into finished goods.
11) Firms dealing with these products require huge amount of working capital
*12) The boom and recession cycle in the economy.
*13) The ratio of different sources of funds in the total capital.
14) A contract by which one person grants possession of some of his property like land, building, machinery to
another for a certain period of time
*15) The internal source of financing.

ANS 1) Finance 2) Financing decision 3) Merchandising firms 4) Investment decision 5)

Fixed Capital 6) Overhead 7) Gross working capital 8) Net working capital 9) Public utility
services 10) Production cycle 11) Luxurious product firms 12) Economic Trend 13) Capital
structure 14) Lease 15) Retained Earnings

Q.10 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 14 - STANDARD 12TH
*1) Finance is related to money and money management.
*2) Business firm gives green signal to the project only when it is profitable.
3) A firm needs less working capital with a longer period of production cycle
*4) Corporate finance brings co-ordination between various business activities.
*5) Fixed capital is also referred as circulating capital.
6) If manufacturing cycle is long, a firm requires less working capital.
*7) 1Working capital stays in the business almost permanently.
*8) The business will require huge funds, if assets are acquired on lease basis.
*9) The business dealing in luxurious products will require huge amount of working capital.
10) capital structure is a security mix
*11) A firm with large scale operations, will require more working capital.
*12) Liberal credit policy creates a problem of bad debts.
13) A short manufacturing cycle requires less working capital
*14) Financial institutions and banks cater to the working capital requirement of business
ANS.
TRUE : 1, 2, 4, 9, 10, 11, 12, 13, 14
FALSE : 3, 5, 6, 7, 8

Q.11 FIND THE ODD ONE (ONE MARKS EACH)

1) Railway, Reliance, Tata power
*2) Land and Building, Plant and Machinery, Cash.
*3) Debenture Capital, Equity Share Capital, Preference Share Capital.
*4) Fixed Capital, Capital Structure, Working Capital.
5) Debentures, Term Loan, Retained Earning

Q.12 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1)Initial planning of capital requirement is made by .......................... .
2) Proportion of different sources of funds raised by a firm for long term finance is called…………..
*3) When there is boom in economy, sales will .......................... .
4) The acquisition and use of capital by business corporation is dealt by……….
*5) The process of converting raw material into finished goods is called .......................... .
6) To decide upon the ratio of different types of capital means to decide………..
7) …………bear ultimate risk associated with ownership
*8) During recession period sales will……………..

ANS 1) Entrepreneur 2) capital structure 3) Increase 4) Corporate finances 5) Production

cycle 6) capital structure 7) Equity shareholders 8) Decrease

Q.13 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Financing decision a) …………..
2) ………………. b) longer period of time
3) Investment Decision c) ………….
4) ……………… d) circulating capital
5) combination of various sources of funds e) ……………
6) Preference share capital f) …………….
(to have right amount of capital, deploy funds in systematic manner, fixed capital, working capital, capital structure,
carry dividend at fixed rate)
ANS 1) to have right amount of capital 2) fixed capital 3) Deploy funds in systematic manner 4)
working capital 5) capital structure 6) carry dividend at fixed rate.

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) Define corporate Finance
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 15 - STANDARD 12TH
Ans. Corporate fiancé deals with the raising and using of finance by a corporation
*2) What is fixed capital?
Ans. Fixed capital is the capital which is used for buying fixed assets which are used for a longer period of time in the
business e.g. capital for plant and machinery etc.
*3) What is working capital?/Define working capital.
Ans. Working capital is the capital which is used to carry out day to day activities and takes into consideration all
current assets of the company e.g. for building up inventories
*4) What is production cycle?
Ans. The process of converting raw material into finished goods is called production cycle.
*5) Define capital structure
Ans. Capital structure means mix up various sources of funds in desired proportion. To decide capital structure means
to decide upon the ratio of different types of capital
6) Define corporate Finance
Ans. Retained earning is an internal source of financing. It is nothing but ploughing back of profit
7) What are term loans
Ans. Term loans are borrowed capital, that carry fixed rate of interest and are usually provided by banks and other
financial institutions.

Q.15 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) Finance is needed to pay dividend to debentureholders.
Ans. Interest
*2) When there is recession in economy sales with increase
Ans. boom
*3) Share is an acknowledgement of loan raised by company
Ans. Debenture
*4) Equity shares carry dividend at fixed rate
Ans. Preference
5) Working capital refers to the investment in current liabilities
Ans. assets.

CHAPTER 2. SOURCES OF CORPORATE FINANCE

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) What is a share and state its features?

Ans. 1) Shares
The term share is defined by Section 2 (84) of the Companies Act 2013, ‘Share means a share in the share
capital of a company and includes stock’.
Share is a unit by which the share capital is divided. The total capital of company is divided into small
parts and each part is called share and the value of each part / unit is known as face value. Share is a small unit
of capital of a company. It facilitates the public to subscribe to the capital in smaller amount.
A person can purchase any number of shares as he wishes. A person who purchases shares of a company is
known as a shareholder or a member of that company.
Features of Shares :
1) Meaning : Share is a smallest unit in the total share capital of a company.
2) Ownership : The owner of share is called as shareholder. It shows the ownership of a shareholder in the
company.
3) Distinctive Number : Unless dematerialised, each share has distinct number for identification. It is
mentioned in the Share Certificate.
4) Evidence of title : A share certificate is issued by a company under it’s common seal. It is a
document of title of ownership of shares. A share is not any visible thing. It is shown by share certificate or in the
form of Demat share.
5) Value of a Share : Each share has a value expressed in terms of money. There may be :
a) Face value : This value is written on the share certificate and mentioned in the Memorandum of Association.
b) Issue price : It is the price at which company sells it’s shares.
c) Market Value : This value of share is determined by demand and supply forces in the share market.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 16 - STANDARD 12TH
6) Rights : A share confers certain rights on its holder such as right to receive dividend, right to inspect
statutory books, right to attend shareholders’ meetings and right to vote at such meetings, etc.
7) Income : A shareholder is entitled to get a share in the net profit of the company. It is called dividend.
8) Transferability : The shares of public limited company are freely transferable in the manner provided in the
Articles of Association.
9) Property of Shareholder : Share is a movable property of a shareholder.
10) Kinds of Shares : A company can issue two kinds of shares : A) Equity shares. (b)Preference shares.
11) Moveable asset: Share is a moveable asset of the shareholder and hence transferable subject to the
provisions of the articles.
12) Issue price: A company may issue shares at par, at premium (Sec.78) or at discount (Sec.79)
13). Mode of payment: The face value may be collected in several installments like Application money, first call and
second call.

*II) What is an equity share and state its features?

Ans. A) EQUITY SHARES :
Equity shares are also known as ordinary shares. Companies Act defines equity shares as ‘those shares
which are not preference shares’.
The above definition reveals that :
a) The equity shares do not enjoy preference for dividend. B) The equity shares do not have priority for repayment
of capital at the time of winding up of the company.
Equity shares are fundamental source of financing business activities. Equity shareholders own the
company and bear ultimate risk associated with the ownership. After paying claims of all other investors the
remaining funds belong to equity shareholders. Thus equity shareholders are ‘residual claimants’ of the income and
assets.
Equity shareholders do not carry any fixed commitment of dividend. They are paid dividend at the rate
recommended by Board of Directors. If there is no profit, no dividend will be payable. Similarly if there is less profit,
lesser dividend will be paid. Thus the fortune of equity shareholders is tied up with the ups and downs of the
company. If the company is successful, they enjoy great financial rewards and if the company fails, the risk falls
mainly on them. It is exactly because of this position equity share capital is known as ‘venture capital’ or ‘risk
capital’. The owners of equity shares are real risk bearers.
However, equity shareholders participate in the management of their company. They are invited to attend
general meetings. They are allowed to vote on all matters discussed at the general meeting. They elect their
representatives to manage the company. Equity shareholders are thus real owners of the company.
Features of Equity Shares :
1) Permanent Capital : Equity shares are irredeemable shares. The amount received from equity shares is
not refundable by the company during its life time. Equity shares become refundable only in the event of winding
up of the company or company decides to buyback shares. Thus equity share capital is long term and permanent
capital of the company.
2) Fluctuating Dividend : Equity shares do not have a fixed rate of dividend. The rate of dividend depends
upon amount of profit earned by company. If company earns more profit, dividend is paid at higher rate. On the
other hand if there is insufficient profit or loss, Board of Directors may postpone the payment of dividend. Equity
shareholders cannot compel them to declare and pay dividend. The income of equity shares is uncertain and irregular.
The equity shares get dividend at fluctuating rate.
3) Rights : Equity Shareholders enjoy certain rights :
a) Right to vote : It is the basic right of equity shareholders through which they elect directors, alter Memorandum
and Articles of Association, etc.
b) Right to share in profit : It is an important right of equity shareholders. They have right to share in profit, when
distributed as dividend. If the company is successful and makes handsome profit, they have advantage of getting large
dividend.
c) Right to inspect books : Equity shareholders have right to inspect statutory books of their company.
d) Right to transfer shares : The equity shareholders enjoy the right to transfer shares as per the procedure laid down
in the Articles of Association.
4) No preferential right : Equity shareholders do not enjoy preferential right in respect of payment of dividend.
They are paid dividend only after dividend on preference shares has been paid.
Similarly, at the time of winding up of the company, the equity shareholders are paid last. Further, if no
surplus amount is available, equity shareholders will not get anything.
5) Controlling power : The control of company is given with the equity shareholders. They are often
described as ‘real masters’ of the company. It is because they enjoy exclusive voting rights. The Act provides the
right to vote in proportion to share holding. They can exercise their voting right by proxies, without even attending
meeting in person.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 17 - STANDARD 12TH
By exercising voting right they can participate in the management and affairs of the company. They elect their
representatives called Directors for management of the company. They are allowed to vote on all matters discussed at
the general meeting. Thus equity shareholders enjoy control over the company.
6) Risk : Equity shareholders bear maximum risk in the company. They are described as ‘shock absorbers’
when company has financial crisis.
If the income of company falls, the rate of dividend also comes down. Due to this, market value of equity
shares comes down resulting into capital loss. Thus equity shareholders are main risk takers.
7) Residual claimant : Equity shareholders as owners are residual claimants to all earnings after
expenses, taxes, etc. are paid. A residual claim means the last claim on the earnings of company. Although
equity shareholders come last, they have advantage of receiving entire earnings that is left over.
8) No charge on assets : The equity shares do not create any charge over assets of the company.
9) Bonus Issue : Bonus shares are issued as gift to equity shareholders. These shares are issued free of cost to
existing equity shareholders. These are issued out of accumulated profits. Bonus shares are issued in proportion to the
shares held. Thus capital investment of (ordinary) equity shareholder tends to grow on its own. This benefit is
available only to the equity shareholder.
10) Right Issue : When a company needs more funds for expansion purpose and raises further capital by issue
of shares, the existing equity shareholders may be given priority to get newly offered shares. This is called ‘Right
Issue’. The shares are offered to equity shareholder first, in proportion to their existing shareholding.
11) Face Value : The face value of equity shares is low. It can be generally Rs. 10 per share or even Rs.1 per
share.
12) Market Value : Market value of equity shares fluctuates according to the demand and supply of these
shares. The demand and supply of equity shares depend on profits earned and dividend declared. When a company
earns huge profit, market value of its shares increases. On the other hand when it incurs loss, the market value of it’s
shares decreases. There are frequent fluctuations in the market value of equity shares in comparison to other securities.
Therefore equity shares are more appealing to the speculator.
13) Capital Appreciation : Share Capital appreciation takes place when market value of shares
increases in the share market. Profitability and prosperity of the company enhances reputation of company in the share
market and it facilitates appreciation of market value of equity shares.

*III) What is a preference share and state its features?

Ans. B) PREFERENCE SHARES :
As the name indicates, these shares have certain preferential rights distinct from those attached to equity
shares.
The shares which carry following preferential rights are termed as preference shares :
a) A preferential right as to payment of dividend during the life time of company.
b) A preferential right as to the return of capital in the event of winding up of company.
The holder of preference share have a prior right to receive fixed rate of dividend before any dividend is paid
to equity shares. The rate of dividend is prescribed at the time of issue.
Normally preference shares do not carry any voting power. They have voting right only on matters which
affect their interest, such as selling of undertaking or changing rights of preference shares, etc. or they get voting
rights if dividend remains unpaid.
The preference shareholders are co-owners of the company but not controllers. These shares are purchased by
cautious investors who are interested in safety of investment and who want steady returns on investments.
Features of preference Shares :
1)Preference for dividend : Preference shares have the first charge on the distributable amount of annual net
profit. The dividend is payable to preference shareholders before it is paid to equity shareholders.
2) Preference for repayment of capital : Preference shareholders have a preference over equity shareholders in
respect of return of capital when the company is liquidated. It saves preference shareholders from capital losses.
3) Fixed Return : These shares carry dividend at fixed rate. The rate of dividend is pre-determined at the time
of issue. It may be in the form of fixed sum or may be calculated at fixed rate.
The preference shareholders are entitled to dividend which can be paid only out of profits. If the directors, in
financial crisis, decide not to pay dividend, the preference shareholders have no claim for dividend.
4) Nature of Capital : Preference shares do not provide permanent share capital. They are redeemed after
certain period of time. A company can not issue irredeemable preference shares.
Preference capital is generally raised at a later stage, when the company gets established. These shares are
issued to satisfy the need for additional capital of the company.
Preference share capital is safe capital as the rate of dividend and market value does not fluctuate.
5) Market Value : The market value of preference share does not change as the rate of dividend payable to
them is fixed. The capital appreciation is considered to be low as compared with equity shares.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 18 - STANDARD 12TH
6) Voting rights : The preference shares do not have normal voting rights. They do not enjoy right of
control on the affairs of the company. They have voting rights on any resolution of the company directly affecting
their rights e.g. : Change in terms of repayment of capital, dividend payable to them are in arrears for last two
consecutive years, etc.
7) Risk : The investors who are cautious, generally purchase preference shares. Safety of capital and steady
return on investment are advantages attached with preference shares. These shares are boon for shareholders during
depression period when interest rate is continuously falling.
8) Face Value : Face value of preference shares is relatively higher than equity shares. They are normally issued
at a face value of Rs. 100/-.
9) Rights or Bonus Issue : Preference shareholders are not entitled for Rights or Bonus issues.
10)Nature of Investor : Preference shares attract moderate type of investors. Investors who are conservative,
cautious, interested in safety of capital and who want steady return on investment generally purchase preference
shares.

*IV) Define a preference share/What are preference shares? and state different types of preference shares
Ans. INTRO AS ABOVE
Types of Preference Shares.
1) . Cumulative Preference shares: Cumulative Preference shares enjoy the right to receive the dividend in
arrears for the year in which the company earned no profits or due to inadequacy of profit. The dividend goes on
accumulating if the company fails to pay the dividend in a particular year. The accumulated arrears of dividends shall
be paid before any dividend is paid to the equity shareholders. Thus, the arrears of dividend are payable out of the
future profits.
2) Non-Cumulative Preference shares: In the case of non-cumulative preference shares, dividend on preference
shares do not accumulated. The preference shareholder is not entitled to any arrears of dividend if it was not paid as a
result of absence or inadequacy of profits. Thus, under this type of share capital, unpaid dividend do not accumulate,
and therefore are not payable in the future.
3) Participating Preference shares: The holders of such shares have a right to participate in the surplus profit of
the company remained after paying dividend to the equity shareholders. They may also be entitled to get a share in
the surplus assets of the company at the time of its winding up.
4) Non-participating preference shares: These are preference share which receive their fixed dividend at
normal rates but do not participate in the surplus profits. If the articles are silent, all preference shares are deemed to
be non participating.
5) Convertible Preference shares: The holder of convertible preference shares have a right to convert their
holdings into equity shares within a specific period at a future date as per terms and conditions of the issue.
6) Non-Convertible preference shares: These type of shareholders do not get the right of conversion of their
holdings into equity share capital. If the articles are silent, all preference shares are deemed to be non convertible
unless stated otherwise in the terms of issue.
7) Redeemable Preference shares: Shares which can be redeemed after certain fixed period of time are called
redeemable preference shares. A company limited by shares, if authorised by Articles of Association, issues
redeemable preference shares. Such shares must be fully paid. These shares are redeemed out of divisible profit only
or out of fresh issue of shares made for this purpose.
8) Irredeemable preference shares: Shares which are not redeemable i.e. payable only on winding up of the
company are called irredeemable preference shares. As per Section 55(1) of the Companies Act 2013, a company
cannot issue irredeemable preference shares.

*V) What is debenture/Define debenture? and state different types of Debentures

Ans. A) DEBENTURES
Debentures are one of the principal sources of raising borrowed capital to meet long and medium term
financial needs. Over the years debentures have occupied a significant position in the financial structure of the
companies.
The term debenture has come from the latin word ‘debere’ which means to ‘owe’.
The term debenture has not been defined clearly under Companies Act.
Sec 2(30) of the Companies Act 2013, only states that, ‘the word debenture includes debenture stock,
bonds and any other instrument of a company evidencing a debt, whether constituting a charge on the assets of
the company or not’.
Under the existing definition, debenture includes debenture stock. Debenture means a document which
either creates or acknowledges debt. Ordinarily, debenture constitutes a charge on some property of company, but
there may be a debenture without any such charge.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 19 - STANDARD 12TH
Palmer defines : “A debenture as an instrument under seal evidencing debt, the essence of it being admission
of indebtedness.”
Topham defines : “A debenture is a document given by a company as evidence of debt to the holder, usually
arising out of loan, and most commonly secured by charge.”
According to the above definitions, debenture is an evidence of indebtedness. It is an instrument
issued in the form of debenture certificate, under the common seal of the company.
Types of Debentures
I. ON THE BASIS OF SECURITY
1. Secured Debentures: The debentures can be secured. The property of company may be charged as security
for loan. The security may be for some particular asset (fixed charge) or it may be the asset in general (floating
charge). The debentures are secured through ‘Trust Deed’.
2. Unsecured Debentures: These debentures are also called as Naked Debentures. These are the debentures that
have no security. The issue ofunsecured debentures is now prohibited by the Companies Act, 2013..
II. ON THE BASIS OF NEGOTIABLILTY/TRANSFERABILITY :
1. Registered Debenture (Sec. 152): Registered debentures are those debentures on which the name of holders
are recorded. A company maintains ‘Register of Debentureholders’ in which the name, address and particulars of
holdings of debentureholders are entered. The transfer of registered debentures requires the execution of regular
transfer deed.
2. Bearer Debenture: Name of holders are not recorded on the bearer debentures. Their names do not appear on
the ‘Register of Debentureholders’. Such debentures are transferable by mere delivery. Payment of interest is made by
means of coupons attached to debenture certificate.
III. ON THE BASIS OF CONVERSION
1. Convertible Debentures: Convertible debentures give right to holder to convert them into equity shares after a
specific period of time. Such right is mentioned in the debenture certificate. The issue of convertible debenture must
be approved by special resolution in general meeting before they are issued to public. These debentures are
advantageous for the holder. Because of this conversion right, convertible debentureholder is entitled to equity shares
at a rate lower than market value.
2. Non-Convertible Debentures: Non-convertible debentures are not convertible into equity shares on maturity.
These debentures are redeemed on maturity date. These debentures suffer from the disadvantage that there is no
appreciation in value
IV. ON THE BASIS OF REDEEMABILITY:
1. Redeemable Debentures: Debentures are mostly redeemable i.e. Payable at the end of some fixed period, as
mentioned on the debenture certificate. Repayment can be made at fixed date at the end of specific period or by
instalment during the life time of the company. The provision of repayment is normally made in ‘Trust Deed’.
2. Irredeemable Debentures: These kind of debentures are not repayable during life time of the company. They
are repayable only after the liquidation of the company, or when there is breach of any condition or when some
contingency arises.

*VI) What is debenture/Define debenture? Explain features of Debentures

Ans. INTRO AS ABOVE
Features
1) Promise : Debenture is a promise by company that it owes specified sum of money to holder of the debenture.
2) Face Value : The face value of debenture normally carries high denomination. It is Rs 100 or in multiples of
Rs. 100.
3) Time of Repayment : Debentures are issued with the due date stated in the debenture certificate. The principal
amount of debenture is repaid on maturity date.
4) Priority of Repayment : Debentureholders have a priority in repayment of debenture capital over the other
claimants of company.
5) Assurance of Repayment : Debenture constitutes a long term debt. They carry an assurance of repayment on
due date.
6) Interest : A fixed rate of interest is agreed upon and is paid periodically in case of debentures. Payment of
interest is a fixed liability of the company. It must be paid by company irrespective of the fact, whether the company
makes profit or not.
7) Parties to Debentures :
a) Company : This is the entity which borrows money.
b) Trustees : A company has to appoint Debenture Trustee if it is offering Debentures to more than 500 people. This
is a party through whom the company deals with debentureholders. The company makes an agreement with
trustees, it is known as Trust Deed. It contains the obligations of company, rights of debentureholders, powers of
Trustee, etc.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 20 - STANDARD 12TH
c) Debentureholders : These are the parties who provide loan and receive, ‘Debenture Certificate’ as an evidence.
8) Authority to issue debentures : According to the Companies Act 2013, Section 179 (3), the Board of
Directors has the power to issue debentures.
9) Status of Debentureholder : Debentureholder is a creditor of the company. Since debenture is a loan taken
by company, interest is payable on it at fixed rate, at fixed interval until the debenture is redeemed.
10) No Voting Right : According to Section 71 (2) of the Companies Act 2013, no company shall issue any
debentures carrying any voting right. Debentureholders have no right to vote at general meeting of the company.
11) Security : Debentures are generally secured by fixed or floating charge on assets of the company. If a
company is not in a position to make payment of interest or repayment of capital, the debentureholder can sell off
charged property of the company and recover their money.
12) Issuers : Debentures can be issued by both private company and public limited company.
13) Listing : Debentures must be listed with at least one recognised stock exchange.
14) Transferability : Debentures can be easily transferred, through the instrument of transfer. 15)Conversion:
Debentures may be convertible into equity shares at the option of debentureholders in case of convertible
debentures.
16) Register of Debentureholders A company is required to maintain Register of debentureholders at the
Registered office of the company as per the companies act.

Q.2 ATTEMPT THE FOLLOWING. (FOUR MARKS EACH)

*I) Explain any five features of equity shares?

Ans. Refer to Q. 1(II)

*II) Explain any four types of preference shares?

Ans. Refer to Q. 1(IV)

*III) Explain features of debentures?

Ans. Refer to Q. 1(VI)

*IV) Explain features of bonds?

Ans. Bond is a debt security. It is a formal contract to repay borrowed money with interest. Bond is a loan. The
holder of bond is a lender to the institution. He is a creditor of the company. He gets fixed rate of interest.
All bonds have maturity date and is paid in cash at certain date in future.
According to Webster Dictionary, ‘A bond is an interest bearing certificate issued by the government or business
firm, promising to pay the holder a specific sum at a specified date.’
Thus a company borrows money and issues bonds as an evidence of debt. Interest is payable on bonds at fixed interval
or on maturity of bonds.
Features
1) Nature of Finance : It is a debt Finance. It provides long term finance. The bonds can be issued for longer
period i.e. 5 years, 10 years, 25 years, 50 years.
2) Status of bondholder : The bondholders are creditors. Since they are creditors and non-owners they are not
entitled to participate in general meeting. They have no voting right and hence no participation in the management.
3) Return on bonds : The bondholder gets a fixed rate of interest. It is payable at regular interval or on the
maturity of bond.
4) Repayment : Bonds have specific maturity date on when the principal amount is repaid

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) ) Equity shareholders are real owners and controllers of company.(Mar 14)
Reasons : a) Equity shareholders are the shareholders who purchase equity shares of a company. b) equity capital is
owned capital which is permanent capital. a company cannot exist without equity shares. c) Equity shares are
fundamental and basic source of financing activities. Equity shareholders are part owners of a company at the same
time they also bear risk associated with ownership. D) sometimes owners are benefitted but sometimes they also bear
loss. Shareholders are dividend as per company profit. There is no dividend if company suffers loss. E) equity
shareholders have voting rights. They attend meetings and elect their representatives for the management of the
company, hence, they are real owners. F) The control of company is vested in shareholders. They are real masters of
the company, as they enjoy exclusive voting right. G) ‘One Share one vote’ is the principle of voting. So, maximum
voting power is with the shareholders. H) if shareholders are unable to attend meeting they may appoint proxies to
vote on their behalf. Thus, by voting they pass resolution and participate in the management of company.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 21 - STANDARD 12TH
Conclusion : Equity shareholders are real owners and controllers of company

*II) Preference shareholders do not enjoy normal voting right in the meeting. ( Mar. 02) (Oct 14)
Reasons : a). “Preference share capital means, with reference to any company limited by shares, that part of the share
capital of the company which fulfils both the following requirements namely.: i) That as respects dividends, it carries
or will carry a prefere3ntial right to be paid a fixed rate and ii) That as respect capital, it carries on a winding up or
repayment of capital, a preferential right”. B). As per the provisions of the companies Act, an equity share holders
can attend and vote in general meeting of the company. c) A preference shareholder cannot attend the general
meeting of the company. d) Since he can not attend the general meeting, he cannot vote also. E) Thus, a preference
shareholder cannot manage the company. f) An equity shareholder can attend and vote and thus manage the company
by appointing the board of directors. G) The appointment of directors and auditors, declaration of dividend rests with
the equity shareholders and not the preference shareholders. H) However, a preference shareholder can attend the
Class meetings which is a meeting of specific class of shares. i) In such meeting preference shareholders can attend
and vote but such meetings are not general meetings. J) . Such meetings are held to discuss any change of rights or
the issues relating to convertibility of preference into equity.
Conclusion: Thus preference shares do not have normal voting rights like the equity shareholders.

*III) Debentures can be secured with some property of a company./ Debentures are secured by charge on assets
of the company
Reasons : a) Debentures is borrowed capital. company collects its borrowed capital by issuing debentures. B)
company issues different types of debentures. On the basis of security company issues ‘Secured Debentures’. They
are issued by charging fixed assets. C) Debenture holders are creditors of company. they want security about the
repayment of their funds. D) as per Company Amendment Act 2000, company cannot issue unsecured debentures.
E) Usually, debentures are issued against constituting charge on company’s fixed assets. F) So, debentures holders
have guarantee about the refund of money. If company fails to make payment after expiry of the period, debenture
holders have right to sell company’s charged assets and recover their money.
Conclusion: Debentures can be secured with some property of a company.

*IV) Retained Earnings is simple and cheapest method of the raising capital/finance.
Reasons : a) Retained earning is the result of wise decision of management to collect company’s own profit. B) it is a
correct method of accumulating company’s part of profit during a period of high profit to overcome business
contingencies. C) it is nothing but saving from the profit that is retained in the business. D) it is a accumulated over
years and reinvested in the business instead of distributing as more dividend. e) it is a part of net profit which is not
distributed to dividend but retained by company as ‘Reserve Fund’ over the years and reinvested in business. F) It is a
simple process of ‘self financing’. It I s also called as ploughing back of profit. G) thus company collects its owned
capital by using simple procedure.
Conclusion : Retained Earnings is easy and cheapest method of the raising capital.

*V) Public Deposit is a good source for short term financing.

Reasons : a) Public deposit is one of the effective means of raising short term finance. B) company requires short
term finance to run its business successfully. Such short term finance fulfills company’s working capital needs. C)
public deposit is a loan raised by company from its investors. Deposits are accepted by public companies for short
period. D) these deposits are accepted for minimum 6 months to 3 years i.e. 36 months. E) Depositor gets Deposit
Receipt as an acknowledgement. F) Company cannot accept deposit for the period more than 36 months. G)
depositor gets interest on their deposits with the company.
Conclusion : Public Deposit is not long term but short term source of finance for the company.

*VI) The bondholders are creditors of the company.

Reasons : a) Bond is a debt security. It is a loan b) When company borrows money, it issues bonds as an evidence of
its debt. C) Bondholder is a creditor of the company. d) bond is a formal contract to repay borrowed money with
interest. E) holders of bond get interest at fixed interval or on maturity of bond. F) bond is loan and holder of bond is
lender who provides loan to the company. company collects borrowed capital by issuing different types of bonds. G)
Equity shareholders are owners of the company.
Conclusion : The bond holders are creditors. They are not owners of the company.

*VII) Trade credit is not cash loan.

Reasons : a) A trade credit is a business to business agreement wherein there is an arrangement to purchase goods and
services on credit and pays at a later date and not immediately. B) The credit period extends upto a month c)
Discount is given if the same is paid earlier d) it is interest free loan given by one business man to another
e) It does not involve loan formalities but only a trade transaction . hence it is not cash loan
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 22 - STANDARD 12TH
Conclusion : Trade credit is not cash loan

VIII) Different investors have different preferences.

Reasons : a) Investors make different decisions and have different risk preferences when getting gains and losses
b) Educated ones may choose for capital markets as compared to others who may invest in gold or silver. C)
Cautious investors are ready to have steady income rather than fluctuations. D) risk takers are ready to face ups
and downs of their invested money and on their returns. E) Active investors try to beat the market while passive
tracks the market index.
Conclusion : Different investors have different choices and preferences

IX) Public companies can accept deposits from public

Reasons : a) Public companies having a net worth of not less than Rs. 100/- crores or a turnover of less than Rs. 500/-
crores can accept deposits from general public b) A meeting has to be converted to get approval of shareholders
c) after approval, a special resolution has to pass and the same has to be filed with the Registrar d)
Advertisements in newspapers have to be given to let people know regarding accepting the deposits e) Deposits,
thus, can be accepted for a period between 6 to 36 months.
Conclusion : Public companies can accept deposits from public.

*X) Equity capital is risk capital

Reasons : a) Equity shareholders have claim over remaining proceeds of the company. B) in the event of
winding up they are the last to be paid off after setting the claims of creditors and external liabilities. C) They
have fluctuating returns and risk of fluctuating market value. D) Equity capital is a permanent capital and
refunded during the life time of the company. E) Not having any assurance as regards dividend, repayment of
capital equity capital becomes risk capital
Conclusion : equity capital is risk capital.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

I) Describe different types of equity shares.

Ans. Types of Equity Shares :
The equity share can be of two types : a) with voting rights. B) with differential voting right.
a) Equity shares with normal voting right : Voting right of such equity holders is in proportion to his
share holdings.
b) Equity shares with differential voting right : Such equity holders shall have varying rights regarding
dividend, voting or otherwise in accordance with Rule 4 of Companies (Share Capital and Debentures) Rules 2014.
Thus company can issue shares with limited voting rights or no voting rights. They may be entitled to extra rate of
dividend, if any.

II) What is retained earning? What are the determinants of retained earnings.
Ans. *RETAINED EARNINGS*
Business organisations are subject to variation in earnings. It would be a wise decision to keep aside a part of
earning during a period of high profit. A prudent company does not distribute the entire profit earned among
shareholders. A part of profit is retained by company in the form of reserve fund. These reserves are the retained
earnings of the company. The sum total of retained earnings gets accumulated over the years. This accumulated profits
are reinvested in the business rather than distributed as dividend.
''The process of accumulating corporate profits and their utilisation in business is called retained
earnings.''
In simple words, a part of net profit, which is not distributed to shareholders as dividend is retained by
company in the form of ‘Reserve Fund’. Company converts it’s reserves into ‘bonus share capital’ and capitalise it’s
profit. This capitalisation of profit by issue of bonus shares is known as ploughing back of profit or self
financing. Bonus shares are issued free of cost to the existing equity shareholders out of the retained earnings.
The Management can convert retained earnings into permanent share capital by issuing bonus shares. It is an
important source of raising long term capital. It is simple and cheapest method of raising finance. It is used by
established companies. It is an internal source of finance.
DETERMINANTS OF RETAINED EARNINGS
a) Total earning of company : ‘Larger the earnings, larger the savings’ is the principle of Economist for collecting
retained earnings. If company gets more profit, it can save and retain part of it for future use.
b) Decision of management : Retained earnings also depend on the decisions of top management. Instead of
distributing additional dividend, company should keep maximum profit as ‘Reserve Fund’
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 23 - STANDARD 12TH
c) Taxation Policy : If taxes imposed by the Government are higher, company can save less amount as retained profit.
d) Dividend Policy : For accumulation of more profit, Board of Directors should adopt Conservative Dividend Policy.
Shareholders get dividend at low rate due to this policy.
e) Government Control : Government policies, rules and regulations also affect company’s working and its dividend
policy. A company must formulate its dividend policy according to rules and regulations of government.

*III) What is Public Deposit?

Ans. Public deposit is an important source of financing short term requirements of company. Companies receive
fixed deposits from the public for the period ranging from 6 months to 36 months. Such deposits are called as
Public Deposits.
Under this method, general public is invited to deposit their savings with the company for varied period.
Interest is paid by companies on such deposits. The company issues ‘Deposit Receipt’ to depositor. The terms of
deposit are mentioned in the ‘Deposit Receipt’. Deposit Receipt is an acknowledgement of debt/loan by the company.
Deposits are either secured or unsecured loans offered to the company.
Meaning :
As per section 2 (31) of Companies Act, 2013, ‘deposit’ includes any receipt of money by way of deposit or
loan or in any other form by a company, but does not include such categories of amount as may be prescribed in
consultation with the Reserve Bank of India.
The above expression has been further elaborated by Rule 2 (1)(c) of Companies (Acceptance of Deposits)
Rules 2014. This Rule provides that ‘deposit’ means any receiptof money, in the form of deposit or loan by a
company. However, ‘deposit’ does not include following :
1) Any amount received from Central Government or a State Government.
2) Any amount received as loan from any banking company.
3) Any amount received from foreign government or international banks.
4) Any amount received by a company from any other company.
5) Any amount raised by issuing commercial paper.
6) Any amount raised by issue of bonds.
7) Any amount received in trust.
8) Any amount received by way of subscription to any shares or debentures.

*IV) State the features of Bonds?

Ans. Refer Q. 2(IV)

*V) What is Global Depository Receipt (GDR) and American Depository Receipt (ADR)?
Ans. Every public company issues shares. These shares are listed and traded on various share markets. Companies
in India issue shares which are traded on Indian share markets like BSE (Bombay Stock Exchange) and NSE (National
Stock Exchange) etc.
With adoption of free economic policy and due to globalization, shares of some of the Indian companies are
also listed and traded on foreign stock exchanges like NYSE (New York Stock Exchange) or NASDAQ (National
Association of Securities Dealers Automated Quotation).
To list shares on stock exchanges, a company has to comply with policies of those stock exchanges. These
policies are much more different from the policies of Indian stock exchange. Therefore, those Indian companies which
cannot list their shares directly on foreign stock exchange, get listed on these stock exchanges indirectly using GDR
and ADR.
Indian companies raise equity capital in international market through GDR and ADR. It is dollar/Euro
denominated instrument traded on stock exchanges of USA and Europe. Company issues shares to an intermediary
called ‘depository’. Bank of New York, Citygroup etc. act as Foreign Depository Banks. The Depository banks issue
GDRs Or ADRs to investors against these shares. Each ‘Depository Receipt’ is having fixed number of shares. These
‘Depository Receipt’ are then sold to people of a foreign country. The Depository Receipts are listed on the stock
exchanges. These Depository Receipt are traded like ordinary shares. In simple words, the depository bank stores the
shares on behalf of the receipt-holder.
Both ADR and GDR are depository receipts. They represent a claim on underlying shares. The only difference
is the location where they are traded. If the Depository Receipt is traded in USA, it is called ‘American Depository
Receipt’(ADR). If the Depository Receipt is traded in a country other than USA, it is called ‘Global Depository
Receipt’(GDR).
ADR and GDR are means of investment for NRI (Non-Resident Indians) and foreign nationals, wanting to
invest money in India. By purchasing ADR or GDR, they can invest directly in Indian companies. NRI and foreigners

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 24 - STANDARD 12TH
can buy Depository Receipts using their regular equity trading account. The companies pay dividend in home
currency to depositories and depositories convert it into the currency of investor and pays dividend.
Advantages
1. GDR and ADR allow investors to invest in foreign companies without worrying about foreign trading practices,
different laws, accounting rules, etc.
2. They offer voting rights to the holders of Depository Receipt.
3. The other benefits are easier trading and payment of dividend in the native currency.
4. The major benefit of Depository Receipt is that the institutional investors can buy them.
5. Depository Receipt also overcome limits or restrictions on foreign ownership that may be imposed by the country
of issuer.
6. They eliminate local taxes or transfer taxes that would be due, if the company shares are bought or sold directly.
7. The main benefit to the company is, to increase coverage in new markets, large and more diverse shareholders base
and ability to raise more capital in international markets.
The exchanges on which GDR is traded are as follows-
1. London Stock Exchange 2. Luxin Bourg Stock Exchange 3. NASDAQ, Dubai
4. Singapore Stock Exchange 5. Hong Kong Stock Exchange.

*VI) What are the schemes for disbursement of credit by bank?

Ans. Commercial banks, by introducing variety of deposit schemes tailored to individual depositor’s need, mop up
savings of people and make use of these savings to meet varied requirements of corporate enterprises.
1) Commercial banks assist corporate enterprises 2) By Granting term loans to companies. 3) By subscribing
to shares and debentures of companies. 4) By underwriting the issue of securities of the Company.
Commercial banks also play an important role in providing short term finance. They have become primary
source of financing working capital of the business. In India, primary source of financing working capital are bank
credit and trade credit.
Banks have introduced many innovative schemes for disbursement of credit. They are as follows :
1) Overdraft : A company having current account with bank is allowed overdraft facility. The borrower can
withdraw funds as and when needed. He is allowed to overdraw on his current account, up to the credit limit
which is sanctioned by bank. Within this stipulated limit any number of drawings are permitted. Repayments can
be made whenever required during the time period. The interest is determined on the basis of actual amount
withdrawn.
2) Cash Credit : It is also an important and popular form of financial aid. This form of credit is operated in same
manner as overdraft facility. The borrower can withdraw amount from his cash credit account up to a stipulated limit
based on security margin. Cash credit is given against pledge or hypothecation of goods or by providing alternative
securities. Interest is charged on outstanding amount borrowed and not on the credit limit sanctioned.
3) Cash loans : Under this, the total amount of loan is credited by bank to the borrowers account. Interest is
payable on actual balance outstanding.
4) Discounting bills of exchange : The drawer of the bill i.e. (seller) can receive money from drawee (i.e. buyer)
on due date or after the due date. Drawer can receive money before due date by discounting the bill with the bank.
This is nothing but selling the bill to the bank. The bank gives money to drawer less than the face value of the bill.
Thus bill of exchange are trade bills. They are accepted by bank and cash is advanced against them.

VII) List our the financial Institutions in India?

Ans. D) FINANCIAL INSTITUTIONS
First industrial policy was declared in 1948 for rapid industrial development in the country. The Central
Government and State Government have established special financial institutions for providing industrial finance.
These institutions provide medium and long term finance. The assistance of these institutions has become important
for new companies as well as going concerns.
I) Development Banks 1) Industrial Development Bank of India (IDBI). 2) Industrial Finance
Corporation of India Ltd. (IFCI) 3) Industrial Credit and Investment Corporation of India (ICICI) 4) Small
Industries Development Bank of India (SIDBI) 5) Industrial Reconstruction Bank of India (IRBI)
II) Financial Institutions 1) Risk Capital and Technology Finance Corporation Ltd. (RCTC) 2) Technology
Development and Information Companyof India Ltd. (TDICI) 3) Tourism Finance Corporation of India Ltd.
(TFCI)
III) Investment Institutions 1) Life Insurance Corporation of India (LIC) 2) Unit Trust of India (UTI)
3) General Insurance Corporation of India (GIC)
IV) State Level Institutions 1) State Finance Corporations (SFC) 2) State Industrial Development
Corporation (SIDC)
Above mentioned institutions provide financial assistance in the following forms :

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 25 - STANDARD 12TH
1) To provide term lending facilities. 2) To subscribe to shares and debentures. 3) To underwrite the issue of
securities. 4) To lend money. 5) To guarantee term loans raised by company.

VIII) Explain the need/Importance/Significance of Institutional Financing?

Ans. Meaning of Financial Institution : Financial Institution are established to provide finance for development
of industrial sector of the economy. The Government of India established 12 financial institutions at national level
and 46 at state level to provide medium and long term finance.
Importance and need
a) To develop sound capital market : Financial institution help in developing a sound financial capital market.
Financial institutions assist industries by purchasing company’s shares directly or selling their shares on behalf of
company. Thus, they directly invest in company or act as an underwriter of company.
b) To Mobilise financial resources : Financial institutions help in developing backward regions. In such regions they
provide assistance and help for development.
c) Capital formation : In underdeveloped countries, due to shortage of finance there is low rate of capital formation.
Financial institutions acts as an investor to bridge the gap between savings and investment.
d) Planned economy : Such institutions provide finance for different projects of national importance. A state finance
corporation plays an important role in planned economic development
e) Financing small business : special corporations have been established for financing the small scale industries. The
problems of small business are tackled by such special institutions.
f) Provide foreign exchange : To do the business at international level foreign exchange is required. Such long term
loans in foreign currencies are provided to develop business.
g) Government Tax policy : Interest payable on such finance raised by financial institutions is deductible charge
from profit or loss account. So, loan account is exempted from tax.
h) Rate of interest : Uniform rate is charged on loan sanctioned. It does not depend on the amount of loan.

*IX) What is trade credit?

Ans. Ans. No business can be run without ‘credit’. It is considered as soul of business. Trade credit financing is
common to all businesses. It is a short term financing to business.
Manufacturers, wholesalers and suppliers of goods or materials are called ‘Trade creditors’. They sell tangible
goods to other business concerns on the basis of future payment i.e. deferred payment. Credit is extended by these
business concerns with an intention to increase their sales. These business firms extent credit, also because of the
custom that has been built up over time. Such credit is not cash-loan. It results from a sale of goods/services, which
have to be paid some time after the sale takes place.
In short, ‘trade credit’ is said to be granted when goods are delivered by supplier to a customer, in advance of
payment.
In distributive trade this kind of credit has great significance. The small retailers, to a large extent rely on
obtaining trade credit from their suppliers. It is a cheap method of financing. It is the easy kind of credit which can be
obtained without signing any debt instrument.
Suppliers sell goods and willingly allow 30 days or more for a bill to be paid. Even they offer discounts, if
bills are cleared within a short period such as 10 days, 15 days, etc.
There are several advantages attached to Trade Credit. Some of them are as follows.
1. Trade credit is the cheapest and easiest method of raising short term finance.
2. It does not require any formal and written agreement.
3. it is readily available at any time.
4. It is free of cost source of financing.
5. The terms of credit are not rigid.

Q.5 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) OWNED CAPITAL AND BORROWED CAPITAL

POINT OWNED CAPITAL BORROWED CAPITAL
1. Meaning It is that capital which is contributed by It is that capital which is borrowed from
shareholders. creditors. It is also known as debt capital.
2. Sources This capital is collected by issue of equity It is collected by way of issue of debentures,
shares and preference shares. fixed deposits, loan from bank/financial
institutions,
etc.
3. Return on The shareholders get dividend as income The debt capital holders get interest as income
Investment on their investment. Rate of dividend is on their investment. Interest is paid at fixed
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 26 - STANDARD 12TH
fluctuating in case of equity shares but rate.
fixed in case of preference shares.
4. Status The shareholders are owners of the The debt holders are creditors of the company.
company.
5. Voting right The equity shareholders enjoy normal The creditors do not enjoy voting rights at the
voting right at the general meeting. general meeting.
6. Repayment The shareholders do not enjoy priority over The creditors get priority over the shareholders
of Capital creditors. They are eligible for repayment in case of return of principal amount at the time
of Capital only after making payment to of winding up of the company.
creditors at the time of winding up of the
company.
7. Charge on The shareholders do not have any charge The secured debenture holders have a charge on
assets on the assets of the company. assets of the company.

*2) EQUITY SHARES AND PREFERENCE SHARES

POINT EQUITY SHARES PREFERENCE SHARES
1. Meaning Shares that are not preference shares Preferences shares are Shares that carry
are called equity shares i.e. these shares preferential right as to payment of :
do not have preferential right for payment 1) Dividend and
of dividend and repayment of capital. 2) Repayment of capital.
2. Rate of Equity shares are given dividend at Preference shareholders get dividend at fixed
Dividend fluctuating rate depending upon the rate.
profits of the company.
3. Voting Right Equity shareholders enjoy normal voting Preference shareholder do not enjoy normal
right. They participate in the management voting right. They can vote only on matters
of their company. affecting their interest.
4. Return of Equity capital can not be returned during A company can issue redeemable preference
Capital the life time of the company. (except in shares, which can be repaid during the life time
case of buy back) of the company.
5. Nature of Equity capital is known as 'Risk Capital.' Preference capital is ‘Safe Capital’ with stable
capital return.
6. Nature of The investors who are ready to take risk The investors who are cautious about safety
investor invest in equity shares. of their investment, invest in preference shares.
7. Face value The face value of equity shares is The face value of preference shares is
generally Rs. 1/- or Rs. 10/- it is relatively relatively higher i.e. Rs. 100/- and so on.
low.
8. Right and Equity shareholder is entitled to get bonus Preference shareholders are not eligible for
bonus issue and right issue. bonus and right issue.
9. Capital Market value of equity shares increases Market value of preference shares does not
Appreciation with the prosperity of company. It leads to fluctuate, so there is no possibility of capital
increase in the value of shares. appreciation.
10. Risk Equity shares are subject to higher risk. Preference shares are subject to less risk. It is
That is because of fluctuating rate of because of fixed rate of dividend and
dividend and no guarantee of refund of preferential right as regards to dividend and
capital. repayment of capital.
11. Types Equity shares are classified into : Preference shares are classified as :
1. equity shares with normal voting 1. Cumulative Preference Shares
right. 2. Non-Cumulative Preference Shares
2. equity shares with differential 3. Convertible Preference Shares
voting right. 4. Non-Convertible Preference Shares
5. Redeemable Preference Shares
6. Irredeemable Preference Shares
7. Participating Preference Shares
8. Non-Participating Preference Shares
12. Priority Equity share holders have second priority Preference share holders have first priority in
in payment of dividend and return of payment of dividend and return of capital over
capital equity holders

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
 SECRETARIAL PRACTICE - 27 - STANDARD 12TH
*3) SHARES AND DEBENTURES
POINT SHARES DEBENTURES
1. Meaning A share is a part of share capital A debenture is a certificate of loan
of a company. It is known as ownership taken by a company. They are also known as
securities. creditorship securities.
2. Status A holder of shares is the owner of A holder of debenture is creditor of the
company. Therefore share capital is company. Debenture capital is loan capital or
owned capital. borrowed capital.
3. Nature It is permanent capital. It is not It is temporary capital. Generally it
repaid during the life time of the company. is repaid after a specific period.
4. Voting / Shareholders being owners enjoy Debentureholders being creditors, do
Right normal voting rights in general meeting. not have any voting right. They can not
They participate in the management of participate in the management of the company.
the company.
5. Return on Return on shares is called Return on debenture is called interest.
Investment dividend. Equity shareholders receive It is fixed at the time of issue. Interest is paid
divided at fluctuating rate where as even when company has no profit.
preference shareholders receive divided at
fixed rate.
6. Security Share capital is unsecured capital. Debenture capital being loan capital is
No security is offered to the shareholder. secured by creating a charge on Company’s
property.
7. Time of Shares are issued in the initial Debentures are issued at a later stage,
Issue stages of the company formation. when the company has properties to offer as
security.
8. Suitability Shares are suitable for long term Debentures are suitable for medium
finance. term finance.
9. Types Shares are classified into Debentures are classified as :
1. Equity shares 1. Registered Debentures
2. Preference 2. Bearer Debentures
3. Secured Debentures
4. Unsecured Debentures
5. Redeemable Debentures
6. Irredeemable Debentures
7. Convertible Debentures
8. Non - convertible Debentures
10 10. Position On liquidation of a company, share Debentureholders being creditors, rank prior to
on liquidation holders rank last in the list of claimants. shareholders for repayment on liquidation of
company.
11. Certificate Share holder given share certificate as a Debenture holder is given a debenture
proof of his share. certificate as a proof of his holding debenture.
12. Conversion Shares can not be converted into Debentures can be converted into shares
debentures
13. Repayment Shares capital is not repayable during Debentures are repayable during lifetime of
lifetime of company except Redeemable company except Irredeemable debentures.
preference shares.
14 position in In the company balance sheet, shares are In the company balance sheet, debentures are
company shown under “share capital.” shown under “secured loans.”
balance sheet:
15. Forfeited: Shares can be forfeited as a result of non Debentures cannot be forfeited as a result of
payment of call money. non payment of call money.
16. Position Shareholders are the last persons to receive Debenture holders are paid in priority over
on winding up: their capital in the event of winding up of share holders at the time of winding up.
the company.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 28 - STANDARD 12TH
Q.6 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR
OPINION(FOUR MARKS EACH)

*I) The balance sheet of a Donald company for the year 2018-19 reveals equity share capital of Rs. 25,00,000/-
and retained earning of rs. 50,00,000/-
A) Is the company financially sound?
Ans. The company is financially sound as it has double the amount as reserves or retained earnings or kept aside
profits
b) Can the retained earnings be converted into capital
Ans. Yes, the retained earning can be converted into capital by means of capitalisation of reserves
c) What type of source retained earning is?
Ans. Retained earning is self financing or internal source of finance.

*II) Mr. Satish is a speculator. He desires to take advantage of growing market for company’s product and
earn handsomely.
A) According to you, which type of share Mr. Satish will choose to invest.?
Ans. As Mr. Satish is a speculator, he will choose equity shares to invest because if there is good earning/profits, so
will be the rate of dividend.
b) What does he receive as return on investment?
Ans. He receives fluctuating rate of dividend.
c) State any one right he will enjoy as a shareholder?
Ans. Right to attend the meeting and vote on resolutions can be the right Mr. Satish can exercise as a member.

*III) Mr. 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 definite rate of income and safety of principal
A)Name the type of security that Mr. Rohit will opt for?
Ans. As Mr. Rohit does not want to take risk, he will opt for preference shares which will assure him of steady income
and safety of his investment.
b) What does he receive as return on his investment?
Ans. Mr. Rohit will receive dividend in return
c) The return on investment which he receives is fixed or fluctuating?
Ans. The return on his investment will be fixed and not fluctuating

*IV) There are 2 companies namely company A and company B with same financial positions and in the same
line (Producing same type of products) willing to issue debentures to more than 500 people. Company A is
issuing 12% redeemable debentures to be redeemed after 5 years and Company B is issuing 12% convertible
debentures which will be converted after 5 years. As an investor
A) Which company would one like to invest?
Ans. As an investor one would like to invest in company B
b) Is it worth investing or going for convertible or redeemable? Why?
Ans. Is it wise and worth investing in 12% convertible debentures as for 5 years both companies are going to give
same returns but after 5 years Company B gives conversion facility due to which creditor becomes a member and can
enjoy all rights of membership.
c) Is there any party to be appointed to look into the safety of debenture holders?
Ans. As the number of persons to whom the debentures are to be issued are more than 500, there has to be a party
known as Debenture Trustee to be appointed who will look into the safety of Debenture holders.

V) A public limited company wants to invite depositor from public at large as it neither want to dilute its
shareholdings not at present want to use its reserves
A) Does it require prior approval from shareholders?
Ans. Yes, prior approval from shareholders is a must
b) What type of resolution does the company need to pass?
Ans. The company needs to pass a special resolution for allowing to invite and accept deposits
c) Is it necessary to file the resolution with the Registrar?
Ans. Yes, a copy of special resolution passed in the general meeting has to be filed before inviting the deposits
VI) A company has an export order which is to be completed by June 15. It feels it may fall shrot of funds ( Rs.
5,00,000/-) as all its investments are likely to mature after july 15
A) does it cancel the export order?

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 29 - STANDARD 12TH
Ans. No, it need not cancel the order as it can approach bank in which it has its current account for providing them
funds.
b) What financi8al arrangements are to be made if it has to co0mplete the order?
Ans. It can enter into or avail overdraft facility for required term period so that in case it falls short of funds, it can
overdraw the required amount.
c) What is the amount of interest it has to pay?
Ans. It will have to pay interest on excess amount overdrawn and for the term it has used this extra amount.

VII) A trader has drawn a bills of exchange for Rs. 50,000/- on the sales made to a trader. The bill is drawn on
1st March 2020 for a period of 4 months . it is already a month from the date of drawing.
A) Is there any source of finance available to him?
Ans. Yes bills of exchange can act as a security and on the basis of the security fiannce can be available to the trader..
b) Can he in present situation avail any facilities?
Ans. Yes event though a month has been completed, discounting facility with the bank is available..
c) How will the charges be calculated?
Ans. Discounting charges will be calculated on the bill amount for 3 months at the prevailing rate decided by the bank

Q.7 EXPLAINT HE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Owned capital

Ans. Owned cpatial is the capital raised by the company with the help of owners(Shareholders). It can be raised by
issuing equity and preference shares

*II) Borrowed capital

Ans. It consists of capital that is raised through borrowings. It can be raised by issuing debentures, deposits, loans
from banks or financial institutions.

*III) Ploughing back of profit

Ans. Ploughing back of profit or retained earnings is a management policy under which all profits are not distributed
amongst shareholders. It is internal source of financing or self financing as when need arises, such reserves are
ploughed back, brought into the business to meet the financial needs.

IV) Public Deposits

Ans. Public deposits are unsecured deposits invited by public limited companye’s to finance working capital needs.
Prior consent from shareholder must be with passing of special resolution and a copy of the same to filed with the
Registrar

V) Bonds
Ans. Bonds is a debt security and a formal contract top repay borrowed money with interest. Bond holder is a lender
to the institution hence, creditor.

*VI) Overdraft
Ans. It is a credit agreement made with a bank that allows an account holder to withdraw more money than what a
company has its account upto a specific limit. This facility is available to current account holders.

VII) Discounting of bills of exchange

Ans. Discounting of a bills of exchange is a facility in which the holder of the bill can convert bill to cash discounting
(giving as security) the bill with the bank before the date of maturity. The bank charges its commission (discounting
charges) and pays the balance to the holder.

*VIII) Trade Credit

Ans. Trade credit is credit extended by one trader to another when goods and services are bought o0r sold on credit. It
facilitates purchase of supplies without making immediate payment. It is used by business organizations as a source
of short term financing and granted to those having reasonable standing and goodwill.

Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) ………….is considered as supreme controlling factor in business
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 30 - STANDARD 12TH
a) Finance b) Material c) Machinery
2) a company with share capital must issue ……………shares
a) preference b) equity c) right
3) A person who purchases shares of a company is known as..................
a) Bond holder b) shareholder c) creditor
*4) ……….is a smallest unit in the total share capital of the company.
a) Debentures b) Bonds c) Shares
5) A ……….. is indivisible unit of share; capital
a) debentures b) shares c) bond
*6) ................. are residual claimants against the income or assets of the company.
a) Bondholders b) Equity Shareholders c) Debentureholders
*7) ................. participate in the management of their company.
a) Preference shareholders b) Depositors c) Equity shareholders
*8) ................. shares are issued free of cost to existing equity shareholders.a) Bonus b) Right c) Equity
*9) The holder of preference share has right to receive ................. rate of divided.
a) fixed b) fluctuating c) lower
*10) Accumulated dividend is paid to ................. preference shares.
a) redeemable b) cumulative c) convertible
11) A shareholder is entitled to receive…………….as return on investment.
a) Dividend b) Interest c) Discount
*12) The holder of ................. preference shares have right to convert their shares into equity shares.
a) cumulative b) convertible c) redeemable
13) ……………shares beat ultimate risk associated with ownership
a) Equity b) Preference c) Deferred
14) The control of the company is vested in……………shareholders
a) Equity b) Preference c) Deferred
15) Bonus shares are issued as free gift to………….shareholder
a) Equity b) Preference c) Deferred
*16) Retained earning are……….source of financing
a) Internal b) External c) Additional
17) Debentures are issued to raise…………capital
a) Owned b) Borrowed c) Internal
*18) Debenture holders are……………of the company
a) creditors b) owners c) suppliers
*19)..................is paid on borrowed capital
a) Interest b) Discount c) Dividend
*20) Debenture holders get fixed rate of ……………as return on their investment.
a) Interest b) Dividend c) Discount
21) Debentures are secured through………
a) Agreement b) Trust Deed c) contract
*22) Convertible debentures are converted into…………..after a specific period.
a) equity shares b) deposits c) bonds
*23) The holder of bond is………... of the company
a) Secretary b) Owner c) creditors
*24)Company can accept deposits from public, minimum for …………months
a) six b) nine c) twelve
*25) company can accept deposits from public maximum for………months.
a) 12 b) 24 c) 36
26) Overdraft facility is allowed to…………account holder.
a) saving b) current c) fixed
27) Small retailers rely on…………..credit from their suppliers.
a) cash b) Trade c) Bank
*28) The benefit of Depository Receipt is ability to raise capital in………….market.
a) national b) local c) International
*29) A depository receipt traded in…………….is called American Depository Receipt
a) London b) Japan c) USA
30) ……………is the Depository Receipt traded in countries other than USA
a) GDR b) ADR c) Fixed Deposit

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 31 - STANDARD 12TH
Q.8 MATCH THE PAIR(ONE MARKS EACH)
*1) A GROUP B GROUP
1) Equity share capital a) Agreement
2) Debenture trustees b) capitalisation of profit
3) Preference shareholders c) Bold investor
4) Debenture certificate d) Venture capital
5) Bonus shares e) document of ownership
f) Capitalisation of loan
g) safe capital
h) instrument of Debt
i) Trust Deed
j) Cautious investor
Ans. (1-d),(2-i),(3-j),(4-h),(5-b)

*2) A GROUP B GROUP

1) Debenture holder a) Owners of the company
2) Retained Profit b) Capitalisation of profit
3) Public Deposit c) Saving account holder
4) Overdraft Facility d) Creditor of the company
5) Equity shares e) maximum 3 years
f) maximum 5 years
g) current account holder
h) ploughing back of profit
i) Permanent capital
j) Temporary capital
Ans. (1-d),(2-h),(3-e),(4-g),(5-i)

Q.10 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1)The real masters of the company
Ans. Equity shareholders
2) The type of shareholders who can participate in the management of the company
Ans. Equity shareholders
*3) A document of ownership of shares
Ans. Share certificate
*4) The holders of these shares are entitled to participate in surplus profits
Ans. Participating preference shares
*5) Name the shareholder who participate in the management
Ans. Equity shareholders
6) Name the shareholder who attends a particular meeting when his interest is affected
Ans. Preference shareholder
*7) The value of share which is written on the share certificate
Ans. Face Value
*8) The value of share which is determined by demand and supply forces in the share market.
Ans. Market value
9) Share holders who are residual claimants against assets and income
Ans. Equity share
*10) The policy of using undistributed profit for the business
\Ans. Retained Earning/Ploughing back of profit
11)The type of shares which can be redeemed after certain period of time
Ans. Redeemable preference shares
*12) A party through whom the company deals with debenture holders
Ans. Debenture trustees
13) Debentures that can be redeemed after a particular date
Ans. Redeemable debentures
14) Debentures that can be converted into equity shares after a specific period
Ans. Convertible debentures
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 32 - STANDARD 12TH
*15) It is an acknowledgement of loan issued by company to depositor
Ans. Deposit Receipt
*16) The credit facility provided to a company having current account with bank
Ans. Overdraft
17) The definite promise in writing from buyer for paying certain amount on a specific date
Ans. Bills of exchange
*18) A dollar denominated instrument trade in USA
Ans. American Depository Receipts (ADR)
*19) The Depository Receipts traded in country other than USA
Ans. Global Depository Receipts (GDR)
*20) Money raised by comjapny from public for minimum 6 months to maximum 36 months
\Ans. Public deposits
21) Credit extended by the suppliers with an intention to increase their sales
\Ans. Trade credit

Q.11 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Equity share capital is known as venture capital
2) Preference shareholders do not enjoy normal voting rights
*3) Equity shareholder enjoy fixed rate of dividend
4) Equity shareholders are real owners and controllers of the company
5) Retained earnings is a difficult and costly method of raising cpatial
6) Debenture holders get fixed rate of dividend
7) Debentures are secured with some property of the company
*8) Debenture holders havr right to vote at general meeting of the comapny
9) Public deposits are good source of long term fianncing
10) Private company can collect deposits from general public
*11) Equity shareholders are described as ‘Shock absorber’ when company has financial crisis.
*12) Bond holders are owners of the company.
13) Providing loan to business is primary function of bank
*14) Cash credit is given against hypothecation of goods and security
*15) Trade credit is major source of long term finance
*16) Depository bank stores the shares on behalf of GDR holder
*17) Financial institutions underwrite the issue of security
18) Financial institutions play an important role in financing industrial firms

ANS.
TRUE : 1, 2, 4, 7, 9, 11, 12, 13, 14, 16, 17, 18
FALSE : 3, 5, 6, 8, 10, 15,

Q.12 FIND THE ODD ONE (ONE MARKS EACH)

*1) Debenture, Public deposit, Retained earnings.
*2) Face value, Market value, Redemption value.
*3) Share Certificate, Debenture Certificate, ADR.
*4) Trade Credit, Overdraft, Cash Credit.
5) Equity shares, Preference shares, Bond
6) Debentures, Bond, Preference shares
7) Public Deposits, Debentures, Retained Earnings
8) ADR, GDR, fixed deposit
9) 6, 24, 36
10) Bonds, Debentures, Shares

Q.13 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) The finance needed by business organisation is termed as .......................... .
2) The value of share which is determines by demand and supply forces in the share market…………

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 33 - STANDARD 12TH
*3) The convertible preference share holders have a right to convert their shares into........... .
4) The shares which have preferential right over equity shares in respect of dividend and return of capital are
*5) Equity shareholders elect their representatives called .......................... .
6) ………..preference shares which are redeemed after a certain period of time
*7) Bonus shares are issued as gift to .......................... .
8) ……………is the value of shares which is written on the share certificate and mentioned in the Memorandum of
Association
*9) The bond holders are .......................... of the company.
*10) Depository receipt traded in a country other than USA is called .......................... .
*11) First Industrial policy was declared in the year .......................... .
*12) When goods are delivered by supplier to customer on basis of deferred payment it is called as .................. .
ANS. 1) Capital 2) Market Value 3) Equity shares 4) Preference shares 5) Directors 6)
redeemable preference shares 7) Equity share holders 8) Face value 9)Creditors 10) Global
Depository Receipts 11) 1948 12) Trade Credit

Q.14 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Equity shares a) …………..
2) ………………. b) Dividend at fixed rate
3) Debentures c) ………….
4) ……………… d) Accumulated corporate profit
5) Public Deposit e) ……………
(Fluctuating rate of dividend, preference shares, interest at fixed rate, Retained Earnings, Short term loan)
ANS 1) Fluctuating rate of dividend 2) Preference shares 3) Interest at fixed rate 4) Retained
earnings 5) Short term loan.

*2) A GROUP B GROUP

1) Debentures a) …………..
2) ………………. b) Public Deposit
3) Bond holder c) ………….
4) ……………… d) Equity share cpaital
5) Depository Receipt traded in USA e) ……………
(Maximum 36 months, Trust Deed, ADR, Creditor, Permanent Capital)
ANS 1) Trust Deed 2) Maximum 36b months 3) Creditor 4) Permanent Capital 5) ADR.

Q.15 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) What is a share?
Ans. A share is a smallest unit of share capital of a company
*2) What are equity shares?
Ans. Equity shares are shares which are not preference shares and do not carry priority in receiving dividend nor
repayment of capital.
*3) What are preference shares.
Ans. Preference shares are shares which have preferential rights with regard to receiving of dividend and repayment of
capital
*4) What are cumulative preference shares?
Ans. cumulative preference shares are shares where dividend, if not paid in a year accumulates till it is paid.
*5) What are retained earnings?
Ans. A part of net profit is not distributed to shareholders as dividend but retained by the company as reserve fund are
retained earnings.
*6) What is debentures?
Ans. It is a document or instruments issued in the form of debenture certificate under common seal of the company
acknowledging debt
*7) What are convertible debentures?
Ans. Convertible debentures are debentures which are converted into equity shares after a specific period as specified
at the time of issue
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 34 - STANDARD 12TH
*8) What is a bond?
Ans. Bond is a debt security and a formal contract to repay borrowed money with interest
9) Who can accept deposit?
Ans. . A public company having a net worth of not less than 100 crore rupees or a turnover of not less than 500 crore
rupees, which has obtained prior consent of shareholders and resolution filed with Registrar before inviting depsoits
can accept deposits
10) What is The minimum and maximum period of deposits that can be accepted from general public.
Ans. Minimum 6 months and maximum 36 months is the period for accepting deposits from general public
11) Who is given overdraft facility?
Ans. A current account holder of a bank is given overdraft facility.
*12) In which country can ADR is issued?
Ans. ADR is a depository receipt that are issued in USA
*13) Om which country can GDR be issued
Ans. GDR can be issued in countries other than USA

Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) Owned capital is temporary capital.
Ans. Permanent
*2) Equity shares get dividend at fixed rate.
Ans. Fluctuating
*3) Preference shares get dividend at fluctuating rate.
Ans. Fixed
*4) Retained earnings is an external sources of finance.
Ans. Internal
*5) Debentureholder is owner of the company.
Ans. Creditor
*6) Bond is a source of short term finance.
Ans. Long
7) Bond holders are owners of the company
Ans. creditors
8) Private company’s can collect deposits from public
Ans. cannot
*9) Depository Receipt traded in USA is called as Global Depository Receipt
Ans. American Deposit Receipt.

Q.17 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Equity Shares, Preference shares, Debentures
Ans. Debentures, Preference shares, Equity shares
*2) Forecasting, Board Meeting, Issue of Security
Ans. Forecasting, Board Meeting, Issue of security
*3) Call Loans, Debentures, Short term loans,
Ans. Call Loans, Short term Loans, Debentures

CHAPTER 3. ISSUE OF SHARES

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Explain the classification of Share Capital (OR) Explain types of Share Capital
Ans. Ans. Introduction: In a company limited by shares, the word capital means share capital. Capital is the money
raised by issuing of Shares. ‘Share’ means share in the share capital of a company. The person owning a share or
shares of a company is called a shareholder. He gets income in the form of Dividend.
Definition of share: “Share means share in the share capital of a company, and includes stock except where a
distinction between stock and shares is express or implied.”
Share capital:
The share capital of company is of the following types.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 35 - STANDARD 12TH
1. Authorized capital: Authorized capital is also referred to as Registered capital or nominal capital. A company
cannot issue equity shares more than of which is mentioned in the Memorandum of Association. It can increase the
amount of authorized capital by passing a resolution effecting the alteration. A company has to pay stamp duty on the
amount of authorized.
Eg. A company has authorized capital Rs 10,00,000/- dividend into 1,00,000 shares of Rs.10/- each.
2. Issued capital: it is that part of authorized capital which is offered by the company subscription. It is issued
from time to time as per the needs of the company.
Eg. A company issues 95,000 shares at Rs. 10/- each for public so issued capital is Rs. 9,50,000/-
3. Un-issued capital: It is that part of the authorized capital which is not offered by the company for subscription.
It may be issued in the future.
Eg. A company in this case has 5000 share of Rs. 10/- each i.e. Rs. 50,000/- which is un-issued.
4. Subscribed capital: It is that part of the issued capital which is subscribed by the public. The subscribed capital
may be equal to or less than the issued capital.
Eg. If out of the issued share capital of Rs. 9,50,000/- the public subscribes for 90,000 shares of Rs. 10/- each. Thus
Rs. 9,00,000/- is the subscribed capital.
5. un-subscribed capital: It is that part of the issued capital which is not subscribed by the public.
Eg. In the above case the unsubscribed capital is Rs. 50,000/-
6. Called up capital : At the time of Issue, full value of the shares is usually not demanded by the company.
Company collects the full value of shares in instalments as per its requirement of funds. Each Instalment is called as
‘calls’. Called-up capital is that part of subscribed capital which a company has ‘called’ or demanded to be paid
by the shareholdersEg. If the company calls up Rs. 6/- on each share, then called up capital will be Rs. 5,40,000/-
(90,000 shares at Rs. 6/- per share)
7. Uncalled up capital: It is that part of the subscribed capital which is not called up by the company.
Eg. If the company doesn’t call up Rs. 4/- on each share, then the uncalled up capital will be Rs. 3,60,000/-. (90,000
shares at Rs. 4/- each)
8. Paid up capital: It is that part of the called up capital which is not paid by the share holders of the company.
“paid-up capital” or “capital paid-up” includes capital credited as paid up. Sec.2(32)
Eg. If the company receives Rs. 4,80,000/- i.e. on 80,000 shares @ Rs. 6/- per share.
9. Unpaid capital/Calls in Arrears : It is that part of the called up capital which is not paid by the shareholders of
the company. It is also called as Calls in arrears.
Eg. If 10,000 shareholders fail to pay call money Rs. 60,000/- (Rs. 5,40,000/- - Rs. 4,80,000/-)
10. Reserve capital: This that part of the uncalled capital, It can be called only in the event of its winding up.
Reserve capital of Rs. 3,60,000/-. (90,000 shares @ Rs. 4/- per share.)

II) What are the methods of issue of shares to the public through public offer?
Ans. A) PUBLIC ISSUE OR PUBLIC OFFER OF SHARES :
Public Issue or offer means offering the shares to the public. This is the most common method used by
companies. The company invites the public to subscribe for its shares by issuing prospectus.
A company can use two pricing methods to offer shares to the public
a) Fixed Price Issue Method : Under this method, the company states in its prospectus, the quantity and the
price at which the shares are offered to the public. The subscribers / investors are asked to pay a certain portion of face
value of shares or entire issue price along with the application. The company comes to know the demand of its shares
only after the subscription period ends. Company can issue shares at par or premium. Fixed Price method is used for
all types of issues i.e. Public Issue, Right Issue, ESOS, etc.
b) Book Building Method : Under this method, the issuer company determines the number of shares and the
issue price at which its shares will be sold by bidding process. The company issues a Red Herring Prospectus
which contains price range or price band and asks the investors to bid on it. The lower end of the price band
is called as ‘floor price’ while the highest end is called as ‘cap price’ or ‘ceiling price’. The final price at
which shares are offered to the investors is called as ‘cut- off’ price. Investors can bid any numbers of shares that
they are willing to buy at any price within the price band. Bidding is kept open for 5 days. The bids along with the
application money is to be submitted to the Lead Merchant Bankers called as ‘Book Runners’ who enters the bids in a
book. After bidding is over, company fixes ‘cut off price’ based on the highest or best price at which all shares on
offer can be sold. Company issues a Prospectus which contains the final price. Book Building Method is used for
Public issues i.e. IPO and FPO.
A company can make Public offer through two methods as follows :
1) Initial Public Offer (IPO) : Initial Public Offer refers to the process of offering shares of a company to
the public for the first time. A new company or an existing company which had raised its capital earlier from

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 36 - STANDARD 12TH
promoters or other investors may offer its shares to the public when it is in need of fresh funds. The first time, the
company offers its shares to the public is called as Initial Public offer.
Before IPO, a company is not a listed company and its shares are privately held. But after IPO, a company
becomes a listed company and its shares can be bought and sold by investors in the open market.
A company can make IPO through fixed price Issue method or Book-Building method.
2) Further Public Offer or Follow on Public Offer (FPO) : When a company issues shares to the public
after an IPO, it is called as further (Follow on) public offer. Thus, every issue of shares by a listed company after its
IPO is called as FPO. FPO leads to an increase in the subscribed capital of a company

*III) Explain briefly the different types of shares offered by a company to its existing equity share holders?
Ans. B) OFFERING SHARES TO EXISTING EQUITY SHAREHOLDERS :
A company can raise funds by offering shares to its existing Equity shareholders as follows
1) Rights Issue :
When a company wants to raise further capital, it can issue shares to its existing Equity shareholders in
proportion to their existing shareholding. Such an issue of shares is called as ‘Rights Issue’ of shares.
Whenever a company makes further issue of shares, the existing Equity shareholders have ‘pre-emptive
rights’(first right to buy) to subscribe to the new shares offered by the company.
A company can make a Rights Issue when it is making a private placement.
Provisions : Company making Rights Issue has to fulfill the following provisions.
a) Rights shares are sold to the existing shareholders at a price which is lesser than its market price.
b) A company has to send ‘Letter of offer’ to the existing shareholders at the time of issuing Rights shares.
c) The letter of offer shall mention :
i) the number of shares offered
ii) the period of offer i.e. offer is valid for a period not less than fifteen days and not exceeding thirty days from the
date of offer.
iii) the right to renounce i.e. the shareholders have a right to give up their shares in favour of any other person.
d) The letter of offer can be sent by registered post, speed post, courier or through electronic mode.
e) If a shareholder does not respond to the Rights Issue offer within the stipulated(specified) time, it is implied that he
is not interested in the offer and the company can offer the unsold shares to new investors.
f) the company has to obtain minimum subscription i.e. 90% of the issue.
2) Bonus Issue / Bonus Shares :
Bonus shares are fully paid shares issued free of cost to the existing equity shareholders in proportion to
their shareholdings. Usually financially sound companies issue Bonus Shares out of its accumulated distributable
profits or reserves. Hence as the profits or reserves are capitalised, it is also called as ‘Capitalisation of Profits or
Reserves’.
Provisions : Following are the provisions related to Bonus Issue
a) A company can issue Bonus Shares only out of : i) Free reserves or ii) Securities Premium Account or
iii) Capital Redemption Reserve Account
b) A company cannot issue Bonus shares only out of reserves created by Revaluation of Assets.
c) It also cannot issue Bonus Shares instead of paying dividend.
d) Once the announcement for Bonus Shares is made by the Board of Directors, it cannot be then withdrawn.
e) Bonus shares are fully paid up shares.
f) Shareholders cannot renounce i.e. give away their Bonus shares to another person.
g) There is no minimum subscription to be collected.

IV) Explain briefly the different offering shares to Existing Employees?

Ans. C) OFFERING SHARES TO EXISTING EMPLOYEES :
A company can raise funds by offering shares to its existing employees as follows 1) ESOS 2) ESPS 3)
SARS 4) Sweat Equity Shares
1) Employees Stock Option Scheme (ESOS) :
Under this scheme, permanent employees, Directors or officers of the company or its Holding Company or Subsidiary
company are offered the benefit or right to purchase the Equity Shares of the company at a future date at a pre-
determined price.
ESOS encourages employees as they feel proud to be owners of the company for which they are working and
company also benefits as it can retain good employees.
Provisions : Following are the provisions related to ESOS
a) A company may offer the shares directly to the employees or through an Employee Welfare Trust. b)The shares are
offered at a price lesser than their market price.
c) There is a minimum vesting period of one year.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 37 - STANDARD 12TH
d) Usually company will specify the lock-in period i.e. period during which employee cannot sell his shares. Lock-in
period is minimum 1 year between grant of option and vesting.
e) Shares issued under this scheme does not enjoy any dividend or voting rights till the employees buys the shares.
f) Company has to get the approval of shareholders through special resolution to issue ESOS.
f) Employee cannot transfer his option to any other person nor can he pledge or mortgage the shares issued under
ESOS.
g) Company has to set up a compensation committee to administer ESOS. Company has to fulfill the provisions of
SEBI (Share Based Employee Benefits) Regulations, 2014.
2) Employee Stock Purchase Scheme (ESPS) :
Under this scheme the company offers Equity shares to its employees at a discounted price which they can
buy at a future date. The company deducts a certain amount from the salary of the employee towards the payment for
the shares.
Provisions : Company must fulfill the following provisions
a) Different number of shares can be offered to different categories of employees.
b) Shares issued through ESPS should be immediately listed.
c) ESPS shares will have a minimum of one year lock-in period from date of allotment if ESPS is not a part of public
issue.
d) Company has to fulfill the provisions of SEBI (Shares Based Employee Benefits) Regulations, 2014.
e) Company has to get the approval of the shareholders through a special Resolution to offer ESPS .
3) Stock Appreciation Rights Scheme (SARS) :
Under this scheme the employees are given a right to receive appreciation in the value of specified number
of shares of the company at a future date. The company allots a specified number of ‘Stock Appreciation Right’ units
that are linked to the value of the company’s shares on the date of allotment. On the relevant date i.e. a future date,
depending upon the appreciation in the value of shares which are linked to the SAR units, the employee is paid the
appreciation value in cash or through Equity shares.
SARS is a form of bonus compensation given to the employees if the company performs well and its market
price of shares goes up.
The employees does not have to pay for buying any shares. Company has to give employees a vesting period
of minimum one year to exercise his option. There is no lock-in period for SARS. To issue SARS, company has
to get approval of shareholders through a special resolution.
4) Sweat Equity Shares :
These are shares issued by a company to its directors or employees at a discount or for consideration
other than cash. It is issued in recognition of their valuable contribution to the company which has resulted in
increased profits.
Sweat Equity shares rank pari passu(at par i.e. equal right) with other Equity shares. These shares have a
lock-in period of three years i.e. they cannot be transferred during this period. Company has to get the approval of
shareholders through Special Resolution to issue Sweat Equity shares

*V) Explain the Statutory provisions for allotment of shares?

Ans. *ALLOTMENT OF SHARES :*
MEANING
When a company gives shares to an applicant based on the application submitted, it is called as Allotment of
Shares.
Supreme court has defined allotment as ‘‘the appropriation(distribution) out of the previously
Unappropriated capital of the company of a certain number of shares to a person.’’
Thus as per this definition, Allotment of shares means allocating (giving) certain number of shares by Board
of Directors out of the previously unallocated capital of the company to persons who have applied for the shares.
A) Statutory Provisions :
These are provisions laid down by the Companies Act, 2013.
1) Registration of Prospectus : A copy of the prospectus must be filed with the Registrar of Companies for
registration on or before the date of its publication. This prospectus must be signed by every proposed Director (in
case of newly formed company) or director or his duly authorised advocate.
2) Application Money : The Companies Act states that along with the application form, the applicant has to
pay a minimum of 5% of the nominal amount of the shares or such other amount as specified by SEBI. SEBI has
specified (for public companies) the application money to be minimum 25% of the nominal amount of shares. The
application money is to be paid in the Bank specified by the company.
3) Minimum Subscription : Minimum subscription is the minimum amount of shares that must be taken or
bought by the subscribers. This amount is mentioned in the prospectus. It must be collected within thirty (30) days
from issue of prospectus.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 38 - STANDARD 12TH
SEBI has stated minimum subscription should be 90% of the issue.
a) Usually when a company does not collect minimum subscription, it means its issue has been under subscribed i.e.
the number of shares applied for is less than the shares offered by the company.
b) If minimum subscription is not collected within the specified time, the entire amount received as application
money should be returned to the subscribers within fifteen days of closure of issue. To avoid such a situation,
company may enter into an underwriting agreement with the underwriters.
4) Closing of subscription list : As per SEBI, the subscription list must be kept open for atleast three
working days and not more than ten working days. Applicants can apply for shares only when the subscription list
is open.
5) Basis of allotment : Allotment of shares will be on the basis which will be decided for each category of
subscribers. Allotment will be as per the minimum application size as fixed by the company.
6) Over subscription : Over subscription means when application received for shares are more than the
number of shares offered by the company.
SEBI does not allow any allotment in excess of securities offered through offer document or prospectus.
However, it may permit to allot not more than 10% of the net offer.
7) Permission to deal on Stock Exchange : Every company, before making a public offer shall apply to one
or more recognised Stock Exchanges to seek permission for listing its shares with them. The prospectus shall mention
the name of the Stock Exchange and the fact that an application for permission to list in that stock exchange has
been made by the company.
8) Appointment of Managers to the issue and various other agencies : Company has to appoint one or more
Merchant Bankers to act as managers to the public issue. It also has to appoint Registrar to the issue, Collecting
Bankers, Underwriters to the issue and Brokers to the issue, self certified syndicate banks, advertising agents etc.

*VI) Explain briefly the procedure for allotment of shares?

Ans. INTRO AS ABOVE
Procedure for Allotment of Shares :
Allotment of shares means distributing shares to those applicants who have submitted a written application along
with the application money.
Following is the procedure for allotment of shares :
1) Appointment of Allotment Committee : When the subscription list is closed the Secretary informs the Board
of Directors to make preparations for allotment of shares.
If the issue is par subscribed or under subscribed, the Board can do the allotment of shares. But if the issue is
over subscribed, the Board has to appoint an Allotment Committee to undertake the work of allotment. The
Allotment Committee will decide the basis of allotment and submit a report to the Board.
2) Hold Board Meeting to Decide Basis of Allotment : Board Meeting is held to approve the allotment
formula suggested by the Allotment Committee. A representative of SEBI is also present when the allotment
committee prepares the allotment formula. If the shares are listed, the formula has to be also approved by the
authorities of the concerned stock exchange.
Once the allotment formula is approved, the application and allotment list is made. This list contains the
names of the allottees i.e. the applicants who will be allotted shares. The list has to be signed by the Chairman and
Secretary.
3) Pass Board Resolution for Allotment : At the board meeting, a resolution is passed to allot shares. The
resolution also authorises the Secretary to issue letters of allotment and letters of regret.
Secretary has to send Letter of Allotment to allottees i.e. those applicants whose names appear in the
application and allotment list. Secretary has to send Letter of Regret to those applicants to whom no shares have been
issued. Along with the letter of regret, the application money is also refunded. Company which issues shares in
electronic mode, does not issue Allotment Letter to individual applicants. Company informs the respective Depository
i.e. NSDL or CDSL about the allotment of shares. It provides the Depository with the details of applicants who have
been allotted shares, number of shares allotted, etc.
4) Collection of Allotment Money : The letter of allotment states the money to be paid by the
applicant on allotment of shares. The money has to be paid in the Bank specified by the company within the
stipulated time.
For all public issues and Rights Issue (from Jan. 2016) ASBA is mandatory.( ASBA : Application Supported by
Blocked Amount. It is an application made by an applicant to his bank to block the application money in the bank
account. In case of allotment, the application money or the full issue value of the shares is transferred to the
company’s banker)
5) Arrangement Relating to Letters of Renunciation (to give up): An applicant who has been allotted shares
can renounce the shares in favour of another person. The applicant has to fill up a form for renunciation and submit

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 39 - STANDARD 12TH
it with the original copy of the letter of allotment to the company. After approval from the Board, Secretary enters the
name of the new allottees in the application and allotment list.
6) Arrangement Relating to Splitting of Allotment Letters : Sometimes, the applicant who has been
allotted shares can request for splitting of allotment letters. Splitting means putting the shares in one or more name.
After getting the approval of the Board for the splitting, Secretary enters the details of the split in the list of split
allotments. Secretary has to also issue split letters.
7) File Return of Allotment : Secretary has to file a ‘Return of Allotment’ with the Registrar of
companies within 30 days of allotment of shares. The return of allotment contains details of allotment of shares
including the names and addresses of allottees, value of shares allotted, amount paid or payable on each shares, etc.
8) Prepare Register of Members and Issue Share Certificate : Secretary has to enter the names of all those
applicants who have paid the allotment money in the Register of Members.
Secretary also has to prepare the Share Certificates and distribute it to all the members within two
months of allotment of shares.
In case of shares held in electronic form (dematerialised), the entries of applicants are made by the
Depository.

Q.2 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Company has to fulfill certain provisions while making Right Issue
Reasons. a) When company wants to issue further capital it can issue shares to its existing shareholders which is
called Right Issue. B) According to Companies Act 2013 company has to fulfill certain provisions for making a
Right Issue FOR PROVISIONS
REFER 1(III) (1) PROVISIONS

II) To issue Bonus Shares a company has to fulfill certain provisions

Reasons. a) Bonus shares are fully paid shares issued free of cost to the existing equity shareholders B)
According to Companies Act 2013 company has to follow certain provisions for Issue of Bonus Shares
FOR PROVISIONS
REFER 1(III) (2) PROVISIONS

III) ESOS is offered by a company to its permanent employees, Directors and officers
Reasons. a) Under this scheme, permanent employees, Directors or officers of the company or its Holding Company
or Subsidiary company are offered the benefit or right to purchase the Equity Shares of the company at a future date
at a pre-determined price. B) ESOS encourages employees as they feel proud to be owners of the company for
which they are working and company also benefits as it can retain good employees. C) Through ESOS, company
can retained its good and talented employees. D) Comapany may offers the shares directly to the employees or
through an Employee Welfare Trust. E) It is helpful to the company to generate good in market also.

IV) Company has to fulfill general principles/rules for allotment of shares

Reasons. a) Every company issuing shares has to fo0llow rules or general principles given by Company Act 2013 as
follows General principles :
These are rules that a company must follow in addition to the provisions of the Companies Act, 2013.
1) Proper Authority : The Board of Directors or the allotment committee set up by the Board has the authority to
allot shares.
2) Allotment must be against application only : A company can allot shares only if it has received a written
application for shares from the applicant.
3) Reasonable time : As per the Act, allotment shall be done within 60 days of receipt of application money.
Allotment can be made from the fifth day from date of issue of prospectus.
4) Absolute and Unconditional allotment : Shares should be allotted on the same terms as stated in the
prospectus and application form. No change in the terms of allotment or new conditions can be added at the time of
allotment.
5) Communication : Company has to inform the applicant that shares have been allotted to him by sending a
letter of allotment or allotment advice. This letter gives details of number of shares allotted, amount of Allotment
money to be paid, etc.
6) Allotment should not be in contravention (violation) of any other laws : A Company cannot allot shares by
violating or contradicting any other existing laws. e.g. Shares cannot be allotted to a minor.
If a company allots shares after fulfilling all the above mentioned requirements or provisions, such an
allotment is called as ‘Regular Allotment’. But if even one provision is not satisfied, then it is called ‘Irregular
Allotment’ and such allotment is invalid.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 40 - STANDARD 12TH

V) A company can issue duplicate share certificate

Reasons. Duplicate Share Certificate : company can issue duplicate share certificate if :
a) Original share certificate has been defaced, mutilated or torn and is surrendered to the company. B) It has been
proved by the holder that the original share certificate is lost or destroyed. C) In case of loss of share
certificate, the company puts up a notice in the newspapers to announce the loss of the Share Certificate and asks the
finder, if any, to return it to the company. D) If company does not get any response from the public, within the
specified time, then the company can issue a duplicate Share Certificate. E) Duplicate share certificate should be
issued within three months from date of application. Company issues it only to registered shareholders. The duplicate
Share Certificate should state in bold that it is a ‘Duplicate Share Certificate’.

VI) Board of Directors have the authority to forfeit shares

Reasons. A) If a shareholder fails to pay calls on shares within a certain period, the Board of Directors, if
authorised by the Articles of Association, can forfeit i.e. take away the ownership of a member. This is called as
forfeiture of shares. B) Only partly paid up shares can be forfeited c) Board can forfeit shares
only in the interest of the company. D) Company has to send a notice of forfeiture to the concerned member.
The notice must give minimum 14 days period from the date of service of notice, to make the payment along
with interest.

VII) A member of a public company can transfer shares

Reasons. A) Transfer of shares means voluntary transfer of shares by a member of a company in favour of
another person against consideration B) In case of public companies, shares are freely transferable subject
to the provisions of the Articles of Association. C) A member has to apply to the company for transfer of shares
by filling the ‘Instrument of Transfer’ and submit the share certificate along with the required transfer fees. D)
Member who is transferring the shares is called as ‘Transferor’ and to whom the shares are to be transferred is
called ‘Transferee’. E) Transfer is said to be completed only when transfer is registered in the Register of
Members

*VIII) The board of Directors can resfuse transfer of shares

Reasons A) Board of Directors have the authority to refuse registration of transfer of shares. B)A notice of
refusal giving the reasons for refusing transfer by the Board is to be sent to the member within thirty days from the
date on which the Instrument of transfer was delivered to the company.
C) The Board may refuse registering the transfer under following conditions :
i) When the provisions for transfer of shares as given in the Articles of Association is not fulfilled by the member.
ii) When the instrument of transfer is not as per the rules prescribed under the Companies Act.
iii) When the Instrument is not accompanied by the Share Certificate.
iv) When the company has a lien on the shares to be transferred.

Q.3 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) What is Book Building Method?

Ans. b) Book Building Method : Under this method, the issuer company determines the number of shares and
the issue price at which its shares will be sold by bidding process. The company issues a Red Herring Prospectus
which contains price range or price band and asks the investors to bid on it. The lower end of the price band
is called as ‘floor price’ while the highest end is called as ‘cap price’ or ‘ceiling price’. The final price at
which shares are offered to the investors is called as ‘cut- off’ price. Investors can bid any numbers of shares that
they are willing to buy at any price within the price band. Bidding is kept open for 5 days. The bids along with the
application money is to be submitted to the Lead Merchant Bankers called as ‘Book Runners’ who enters the bids in a
book. After bidding is over, company fixes ‘cut off price’ based on the highest or best price at which all shares on
offer can be sold. Company issues a Prospectus which contains the final price. Book Building Method is used for
Public issues i.e. IPO and FPO.

*II) State the Provisions for Right Issue?

Ans. a) When company wants to issue further capital it can issue shares to its existing shareholders which is called
Right Issue. B) According to Companies Act 2013 company has to fulfill certain provisions for making a Right
Issue FOR PROVISIONS
REFER 1(III) (1) PROVISIONS

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 41 - STANDARD 12TH
*III) State the Provisions related to Bonus Shares?
Ans. a) Bonus shares are fully paid shares issued free of cost to the existing equity shareholders B)
According to Companies Act 2013 company has to follow certain provisions for Issue of Bonus Shares
FOR PROVISIONS
REFER 1(III) (2) PROVISIONS

*IV) State the General Principles/Rules for allotment of shares?

Ans. REFER TO Q. 3(IV)

*V) State the contents of Share certificate?

Ans. *SHARE CERTIFICATE*
It is a registered document issued by a company which is an evidence of ownership of specified number of
shares of the company. Share certificate is a prima facie evidence of title to shares
If any dispute about membership arises, the share certificate will be held as evidence and not the entries in the
Register of Members.
Share certificate has to be issued under the common seal of the company, if any and signed by two
Directors duly authorised by the Board of Directors and the Company Secretary or any other authorised
person.
Company has to issue the share certificate to all allottees as well as transferees on transfer of shares. It is
issued on partly or fully paid up shares.
Contents of Share Certificate :
Share certificate should be in Form SH-1 as prescribed under Companies (Share Capital and Debenture) Rules, 2014.
Following are the contents of a share certificate
i) Name of the Company, CIN, Registered office address.
ii) Folio Number
iii) Share Certificate Number
iv) Name of Member
v) Nature of share, number of shares and distinctive number of the shares.
vi) Amount paid on shares
vii) Common Seal, if any and signature of two Directors and Company Secretary .

*VI) What are the effects of forfeiture of shares

Ans. If a shareholder fails to pay calls on shares within a certain period, the Board of Directors, if authorised by
the Articles of Association, can forfeit i.e. take away the ownership of a member. This is called as forfeiture of
shares. Only partly paid up shares can be forfeited
Board can forfeit shares only in the interest of the company. Company has to send a notice of forfeiture to
the concerned member. The notice must give minimum 14 days period from the date of service of notice, to make
the payment along with interest.
Effects of forfeiture
i) Cessation(cancellation) of Membership : On forfeiture, a member ceases to be member of a company
and loses all membership rights. The member’s name is removed from the Register of Members.
ii) Liability of member : A member is liable for unpaid calls even after forfeiture of shares. The liability
ceases only when the company reissues the forfeited shares.
iii) Liquidation of company : If a company goes in for liquidation within one year of forfeiture of shares,
the member whose shares have been forfeited is liable to pay the calls as a past member.

*VII) When can the Board of Director refuse transfer of shares?

Ans. Refusal to transfer shares :
Board of Directors have the authority to refuse registration of transfer of shares. A notice of refusal giving the
reasons for refusing transfer by the Board is to be sent to the member within thirty days from the date on which the
Instrument of transfer was delivered to the company.
The Board may refuse registering the transfer under following conditions :
i) When the provisions for transfer of shares as given in the Articles of Association is not fulfilled by the member.
ii) When the instrument of transfer is not as per the rules prescribed under the Companies Act.
iii) When the Instrument is not accompanied by the Share Certificate.
iv) When the company has a lien on the shares to be transferred.
A member may appeal to the NCLT against the refusal by the Board within a period of thirty days from date
of receipt of refusal notice. If no notice is received, the member can appeal within 60 days in case of a Private
Company and within 90 days in case of a Public Company.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 42 - STANDARD 12TH

*VIII) Explain Employee Stock Option Scheme (ESOS)?

Ans. Refer Q. 1(IV)(1)

*IX) What is Calls on Shares?

Ans. CALLS ON SHARES
At the time of issue of shares, a company may state that the issue price of the shares is to be paid in
instalments as and when the company demands for it. So when a company demands the shareholder to pay a part or
full amount of the balance amount unpaid on shares, it is called as ‘Calls on Shares’.
Thus, besides the application money and allotment money, if a company demands the balance unpaid amount
on shares, it is called as calls on shares. The unpaid amount on partly paid up shares is a liability of the share holder.
If the shareholder fails to pay the calls, company can forfeit the shares.
Calls can be made only by the Board of Directors in the interest of the company. Company has to send a call
letter/notice to the shareholders asking them to pay the call money and give them minimum 14 days notice to pay
the call money to the Company’s Banker. No call can be made for more than 25% of the nominal value of
shares. The gap between two calls should not be less than one month from the date fixed for the payment of last
preceding call. The rules and procedure to make calls is given in the company’s Articles of Association.

*X) Explain private placement method for issue of shares?

Ans. D) PRIVATE PLACEMENT :
When a company offers its securities to a select group of persons not exceeding 200, it is called as Private
Placement.
In other words, company offers its securities only to identified persons and not to the general public.
1.The Board of directors select or identify the persons to be included in the select group. They can be Mutual
Funds, Institutional Investors, etc.
2.Company has to issue private placement offer letter along with the application.
3.The shares offered can be fully or partly paid up and the consideration should be paid by cheque, Demand Draft,
etc. but not by cash.
4.Right to renunciation is not given to applicants under Private Placement. Company has to get approval of
shareholders through a Special Resolution.
5.A company can make Private Placement in two ways :
1) Rights Issue : (We discussed the same under the heading ‘offering shares to Existing Equity shareholders.’)
2) Preferential Allotment : When a company issues specified securities i.e. Equity shares or securities that can be
converted into Equity shares in future, to a select group of persons on preferential basis, it is called as ‘Preferential
Allotment’.
Usually the company offers preferential allotment to promoters, existing shareholders, employees, venture
capitalists, etc.
The shares offered are fully paid up and the applicants have to pay the consideration in cash. Shares issued
under preferential allotment have no voting rights. Approval of shareholders in the form of Special Resolution is
needed to make Preferential allotment. Companies usually go for Preferential Allotment as it is not only less time
consuming but also involves less paperwork and formalities.

XI) What is transfer of shares?

Ans. TRANSFER OF SHARES
Transfer of shares means voluntary transfer of shares by a member of a company in favour of another
person. A member may transfer the shares for consideration or give it away as gift. Every member has a right to
transfer their shares.
In case of public companies, shares are freely transferable subject to the provisions of the Articles of
Association. Whereas, in case of Private Company, there are restrictions on free transfer of shares.
A member has to apply to the company for transfer of shares by filling the ‘Instrument of Transfer’ and
submit the share certificate along with the required transfer fees. Member who is transferring the shares is called as
‘Transferor’ and to whom the shares are to be transferred is called ‘Transferee’.
A member can sell either a part or entire shares held by him.
Transfer is said to be completed only when transfer is registered in the Register of Members. Under
Depository System, transfer of shares is automatically done on the basis of delivery against payment. Once the shares
are transferred, the liability of the transferor ends.
Stamp duty has to be paid on transfer of shares in physical form but in demat form, no stamp duty is
payable.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 43 - STANDARD 12TH
Q.4 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) Initial Public Offer and Further Public Offer

Points Initial Public Offer Further Public Offer
1. Meaning IPO refers to an offer of securities by an FPO means an offer of securities by a listed
unlisted Public Company to the public for Public Company to the public to raise
the first time. subsequent capital.
2. Type of It is issued by an unlisted Public Company. It is issued by a listed Public Company.
issuer company
3. When issued It is usually issued by an existing company It is usually issued by a listed Public company
which wants to raise capital from the when it wants to raise further capital from the
public for the first time. public.
4. Order of IPO preceeds FPO. IPO is the first time FPO is always done after IPO. FPO is the
issue sale of shares to the public. second or subsequent sale of shares to the
public.
5. Listing Company has to get itself listed for the first Company making an FPO is already a listed
time before issuing IPO. company.
6. Risk It is very risky for the investor as he cannot It is less risky for the investor as he has an idea
predict the company’s performance. of the company’s past performance and can
judge its future performance.

*II) Fixed Price Issue Method and Book Building Method

Points Fixed Price Issue Method Book Building Method
1. Meaning Under this method, the issue price of Under this method, the issue price is
shares is mentioned in the prospectus and determined by a bidding process. The investors
investors have to buy shares at that price are given a price band and are asked to bid at a
only. price within the band. This way company
arrives at a price at which it will sell its shares.
2. Price of The exact price of shares is known in The price of shares is not known in advance.
Shares advance and it is mentioned in the Only the minimum price and maximum price at
prospectus. which the company is willing to sell the
shares is known in advance.
3. Prospectus Company has to issue a prospectus and it Company issues a Red Herring Prospectus. It
contains the details of price at which contains only the price band and the total size
shares are offered and the total number of of issue.
shares offered by the company.
4. Company comes to know the public Company can know the public demand for its
Determination demand for its shares only after closure of shares everyday. The bids are registered in the
of Demand the issue book everyday till the closure of
the issue.
5. Payment of Application money or entire money has to Only application money has to be paid at the
Application be paid by the investor at the time of time of bidding. Money will be collected only
Money submitting after
his application for shares. the issue price has been fixed.
6. When Used It can be used for any issue i.e. Public It is usually used in Public issues i.e. IPO and
Issue, Rights Issues, ESOS, etc. FPO.
*III) Right Shares and Bonus Shares
Points Rights Shares Bonus Shares
1. Meaning In rights issue, shares are offered to the Bonus shares are issued to the existing equity
existing equity shareholders i.e. Company shareholders free of cost.
offers the shareholders the first option to
buy the shares of the company.
2. Payment Subscribers have to pay for the Rights Bonus shares are issued free of cost to the
Shares. Company only gives them a right shareholders.
to buy these
shares.
3. Partly / fully Shareholders have to pay for these shares Bonus shares are fully paid up shares. So no

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 44 - STANDARD 12TH
paid up shares as Application Money, Allotment, Call money has to be paid by the shareholders to
Money etc. till the full money on shares the company.
is paid up.
4. Minimum Company has to obtain minimum There is no minimum subscription to be
Subscription subscription. If the company fails to collected as Bonus shares are issued free of
receive minimum subscription, it has to cost by the company.
refund the entire application money
received.
5. Right to The shareholders can renounce his shares. Shareholders cannot renounce his bonus
Renounce shares.
6. Purpose of Rights issue is done by a company when When company has accumulated huge profits
Issue it wants to raise fresh funds but wants to or reserves and company wants to reward its
give a chance to their existing members existing Equity shareholders, company issues
to increase their shareholding. Bonus shares.

*IV) Transfer of shares and Transmission of Shares

Points Transfer of Shares Transmission of Shares
1. Meaning Transfer of shares means voluntarily or It means transfer of ownership of a
deliberately giving away one’s shares to member’s shares to his legal representative
another person by entering into a contract due to operation of law. It takes place on
with the buyer. death, insolvency or insanity of the
members.
2. When done It is done when the member wants to sell It is done when the member dies or becomes
his shares or give his shares as gift. insolvent or insane.
3. Nature of It is a voluntary action taken by It is an involuntary action. It is
Action the member. due to operation of law.
4. Parties In transfer of shares there are two parties There is only one party e.g. the nominee of
involved involved- the member who is called as the member in case of death of the member
transferor and the buyer who is called as or the legal representative.
transferee.
5. Instrument of Transfer requires Instrument of transfer. No Instrument of transfer is
transfer It is a contract between the transferor and needed.
transferee.
6. Initiated by Transferor initiates the transfer process. Legal representative or official receiver
initiates the process of transmission.
7. Consideration Transfer of shares is done often by the No consideration is involved here. The legal
member to receive some consideration heir or official receiver need not pay for the
(money) i.e. the buyer has to pay for the shares.
shares. (Except given as gift.)
8. Liability The liability of the transferor ends after Original liability of the member continues in
the shares are transferred. case of transmission of shares.
9. Stamp Duty Stamp duty as per the market value of No stamp duty is to be paid
shares has to be paid.

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*I) Eva Ltd. Company’s capital structure is made up of 1,00,000 Equity shares having face value of Rs. 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 Rupees`.
A) Authorised capital
Ans. The Authorised capital is Rs. 10,00,000/- (1,00,000 equity shares of Rs. 10/- each)
B) Subscribed capital
Ans. The subscribed capital is Rs. 3,00,000/- (30,000 equity shares of Rs. 10/- each)
C) Issued capital
Ans. The issued capital is Rs. 4,00,000/- (40,000 equity shares of Rs. 10/- each)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 45 - STANDARD 12TH
*II) TRI Ltd. Company is newly incorporated public company and wants to raise capital by selling Equity
shares to the public. The Board of Directors are considering various options for this. Advise the Board on the
following matters :
A) What should the company offer - IPO or FPO ?
Ans. The company should offer IPO
B) Can the company offer Bonus Shares to raise its capital ?
Ans. Company cannot offer Bonus shares. As Bonus shares are given out of only accumulated capital or reserves
only
C) Can the company enter into Underwriting Agreement ?
Ans. Yes, The company can enter into Underwriting Agreement. The underwriters assure the company tot ake up the
unsold shares so that company can be able to raise the minimum subscription

*III)Silver Ltd. Company has recently come out with its public offer through FPO. Their issue was over
subscribed. The Board of Directors now wants to start the allotment process. Please advise the Board on :
A) Should the company set up allotment committee ?
Ans. Yes. The company should set up an allotment committee as the issue is over subscribed so the Board has to
setup allotment committee.
B) How should the company inform the applicants to whom the company is alloting shares ?
Ans. Company should inform the applicants through a letter of allotment for allotting shares.
C) Within what period should the company issue share certificate ?
Ans. company should issue shares certificate within two months from date of allotment.

*IV) Red Tubes Ltd. has made a demand on its shareholders to pay the balance unpaid amount of Rs 20/- per
share (having a face value of Rs 100) held by them. The company has sent letters asking the shareholders to pay
the money to its Bankers within the specified time.
A) Are the shareholders liable to pay Rs 20 for the shares held by them ?
Ans. Yes, the shareholders liable to pay Rs. 20/- for the shares held by them. When a company demands the
shareholder to pay a part or full amount of the balance amount unpaid on shares it is called ‘calls on shares’
B) Name the letter sent by the company to its shareholders asking them to pay Rs 20/-
Ans. Company will send ‘call letter; to its shareholder for asking them to pay Rs. 20/-
C) What happens if a shareholder fails to pay the money within the specified time ?
Ans. If a shareholder fails to pay call money within the specified time, the company can forfeit the shares.

*5) 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 Rs. 20. X pays the full money demanded by the company. Y, who is in a
bad financial position is unable to pay any money.
A) Can the company forfeit the shares of Y ?
Ans. Yes, the company can forfeit the shares of Y as he failed to pay calls on shares within a certain period
B) Can the company forfeit the shares of X ?
Ans. Company cannot forfeit the shares of X as he paid full amount of shares. Only partly paid up shares can be
forfeited.
C) Can X transfer his shares ?
Ans. Yes, X can transfer his shares by filling instrument of transfer

Q.7 EXPLAINT HE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Fixed Price Method

Ans. In an initial Public Offer (IPO), if the shares are offered at a fixed price such issue is known as Fixed Price Issue.
In this method company mentions the quantity and the price at which shares are offered.

*II) IPO
Ans. Initial Public Offer is the sale of equity shares to the public first time in order to raise capital. This is the most
popular and common method used by companies. The company invites the public to subscribe for its shares by
issuing prospectus

*III) FPO
Ans. It is also called as follow on public offer. When the company issue shares to the public after IPO, it is called as
further Public Offer. Thus every issue of shares by a listed company after its IPO is called as FPO. FPO leads to an
increase in the subscribed capital of the company..
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 46 - STANDARD 12TH

*IV) Rights Issue

Ans. A rights issue is an invitation to existing share holders to purchase additional new shares in the company. A
rights issue is a way by which a listed company can raise additional capital.

*V) Bonus Issue

Ans. Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge.
The Bonus Shares are given to the existing equity shareholders according to their existing proportion of equity
shareholdings .

*VI) Employee stock Option Scheme

Ans. Under this scheme, permanent employees, Directors or officers of the company or its Holding Company or
Subsidiary company are offered the benefit or right to purchase the Equity Shares of the company at a future date at
a pre-determined price. ESOS encourages employees as they feel proud to be owners of the company for which they
are working and company also benefits as it can retain good employees.

*VII) SARS
Ans. It is a method for companies to offer their employees a bonus compensation if the company performs well
financially. The company allots a specified number of ‘Stock appreciation Rights’ units that are linked to the value of
the company’s shares on the date of allotment

*VIII) Sweat Equity Shares

Ans. These are shares issued by a company to its directors or employees at a discount or for consideration other
than cash. It is issued in recognition of their valuable contribution to the company which has resulted in increased
profits.
Sweat Equity shares rank pari passu(at par i.e. equal right) with other Equity shares. These shares have a
lock-in period of three years i.e. they cannot be transferred during this period. Company has to get the approval of
shareholders through Special Resolution to issue Sweat Equity shares

IX) Authorised Capital

Ans. . Authorized capital is also referred to as Registered capital or nominal capital. A company cannot issue
equity shares more than of which is mentioned in the Memorandum of Association. It can increase the amount of
authorized capital by passing a resolution effecting the alteration. A company has to pay stamp duty on the amount of
authorized.

*X) Paid Up Capital

Ans. It is that part of the called up capital which is not paid by the share holders of the company. “paid-up capital”
or “capital paid-up” includes capital credited as paid up. The paid capital can be equal to or less than the authorized
capital

*XI) Subscribed Capital

Ans. It is that part of the issued capital which is subscribed by the public. The subscribed capital may be equal to or
less than the issued capital.

*XII) Allotment of Shares

Ans. When a company gives shares to an applicant based on the application submitted, it is called as Allotment of
Shares. Allotment of shares means allocating (giving) certain number of shares by Board of Directors out of the
previously unallocated capital of the company to persons who have applied for the shares.

*XIII) Minimum Subscription

Ans. Minimum subscription is the minimum amount of shares that must be taken or bought by the subscribers. This
amount is mentioned in the prospectus. It must be collected within thirty (30) days from issue of prospectus.
SEBI has stated minimum subscription should be 90% of the issue. If minimum subscription is not collected within
the specified time, the entire amount received as application money should be returned to the subscribers within
fifteen days of closure of issue

*XIV) Share Certificate

Ans. It is a registered document issued by a company which is an evidence of ownership of specified number of shares
of the company. Share certificate is a prima facie evidence of title to shares. Share certificate has to be issued

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 47 - STANDARD 12TH
under the common seal of the company, if any and signed by two Directors duly authorised by the Board of
Directors and the Company Secretary or any other authorised person.

*XV) Calls on Shares

Ans. when a company demands the shareholder to pay a part or full amount of the balance amount unpaid on
shares, it is called as ‘Calls on Shares’. Thus, besides the application money and allotment money, if a company
demands the balance unpaid amount on shares, it is called as calls on shares

*XVI) Forfeiture of Shares

Ans. If a shareholder fails to pay calls on shares within a certain period, the Board of Directors, if authorised by the
Articles of Association, can forfeit i.e. take away the ownership of a member. This is called as forfeiture of
shares. Only partly paid up shares can be forfeited. Thus forfeiture of shares means cancellation of shares.

*XVII) Transfer of Shares

Ans. Transfer of shares means voluntary transfer of shares by a member of a company in favour of another
person against consideration Member who is transferring the shares is called as ‘Transferor’ and to whom
the shares are to be transferred is called ‘Transferee’. Transfer is said to be completed only when transfer
is registered in the Register of Members

*XVIII) Blank Transfer

Ans. When a member signs the Instrument of transfer without filling in the name of the transferee and hands it
over to the transferee along with the share certificate, it is called ‘Blank Transfer’.
Blank transfer enables easy purchase and sale of shares as the blank transfer form can be sold any number of
times. The intermediate buyers need not pay Stamp Duty. A holder of Blank transfer form enjoys all rights a member
is entitled to have.

*XIX) Forged Transfer

Ans. Forged transfer is where the signature of the transferor is forged. Company should not register such transfer of
shares. It is a null transfer and does not counter any title. As a signature of transferor is forged, company should not
register such transfer of shares.

*XX) Private Placement

Ans. When a company offers its securities to a select group of persons not exceeding 200, it is called as Private
Placement. In other words, company offers its securities only to identified persons and not to the general public.

*XXI) Transmission of shares

Ans. Transmission of shares takes place due to operation of law i.e. the shares of a member is automatically
transferred to another person on the death, insolvency or insanity of a member. Thus transmission of shares is an
involuntary action. There is only one party i.e. Legal Heir who initiates the process of transmission. The legal heir
or official receiver need not pay any consideration for the shares. Original liability of the member continues incase of
transmission. There is no need to submit Instrument of Transfer or pay stamp duty.

*XXII) Surrender of shares

Ans. This means voluntary return of shares by the member to the company for cancellation . Surrender of shares
is allowed only if there is no other option but to forfeit the shares. Only partly paid up shares can be surrendered.
Surrendered shares can be reissued in the same way as forfeited shares. The Articles of Association of a
company must provide for surrender of shares.

Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1) .................. refers to capital made up of Equity and preference shares
a) Share capital b) Debt capital c) Reserve fund
*2) .................. capital refers to maximum capital a company can raise by issuing shares.
a) Issued b) Authorised c) Paid up
*3) .................. means shares are offered to the public.
a) Rights Issue b) Private Placement c) Public Issue
*4) Under .................. method, issue price of shares is based on bidding.
a) Book Building b) Fixed Price c) Bonus Issue
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 48 - STANDARD 12TH
*5) In .................., shares of a company are offered to the public for the first time.
a) Further Public Offer b) Initial Public Offer c) Public Offer
*6) .................. is offered to existing equity shareholders.
a) IPO b) ESOS c) Rights Issue
*7) Bonus shares are issued free of cost to .................. .
a) existing Equity shareholders b) existing employees c) Directors
*8) .................. are offered to permanent employees, Directors and Officers of a company.
a) Bonus Shares b) Rights Issue c) ESOS
*9) Under…………a company offers its securities to a select group of persons not exceeding 200 .
a) Private Placement b) IPO c) Public Offer
*10) The .................. have the power to allot shares.
a) Director b) Board of Directors c) Company Secretary
*11) Letter of .................. is sent to applicants who have been given shares by the company.
a) Regret b) Renunciation c) Allotment
*12).................. is a proof of title to Shares.
a) Share Certificate b) Register of Member c) Letter of Allotment
*13) The gap between two calls should not be less than .................. .
a) 14 days b) One month c) 21 days
*14) Company can .................. shares on non-payment of calls.
a) forfeit b) surrender c) allot
*15) Voluntarily giving away one’s share to another person is called as .................. of shares.
a) Transfer b) Transmission c) Surrender
*16) .................. of shares takes place due to operation of law.
a) Forfeiture b) Allotment c) Transmission
17) …………of company must have provision regarding issue of bonus shares.
a) Memorandum of Association b) Articles of Association c) Prospectus
18) If a share of Rs. 100/- is issued at Rs. 100/-, it is said to be issued at ………….
a) Par b) Discount c) Premium
19) If a share of Rs. 100/- is issued at Rs. 90/-, it is said to be issued at ………….
a) Par b) Discount c) Premium
20) …………..means placing the shares privately without inviting the public for subscription
a) Private Placement b) Public Placement c) Transfer
21) A share certificate must be signed by at least…………..directors.
a) two b) three c) four
22) Letter of regret is accompanied by………….
a) refund order b) call letter c) Dividend warrant

Q.8 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Death of member a) Forfeiture of shares
2) Voluntary return of shares to company by member b) Book Building Method
3) Price of shares mentioned in prospectus c) Offered to existing employees
4) ESPS d) Surrender of shares
5) Regret Letter e) Transmission of shares
f) Non-allotment of shares
g) Offered to existing Equity shareholders
h) Transfer of shares
i) Fixed price issue method
j) Allotment of shares
Ans. (1-e),(2-d),(3-g),(4-c),(5-f)

*2) A GROUP B GROUP

1) Issued capital a) Non-payment of calls
2) FPO b) Any issue after IPO
3) Bonus shares c) Offered to existing employees
4) Issued within two months of allotment of shares d) Capital offered to public to subscribe
5) Forfeiture of shares e) Share certificate
f) First time issue of shares
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 49 - STANDARD 12TH
g) Free shares issued to existing equity shareholders
h) Maximum capital a company can raise
i) Allotment Letter
j) Operation of law
Ans. (1-d),(2-b),(3-g),(4-e),(5-a)

3) A GROUP B GROUP
1) Share certificate a) Capitalisation of profit
2) Bonus Shares b) Transfer of shares due to operation of law
3) Under subscription c) Bearer document
4) Transfer of shares d) More applications than expected
5) Private placement e) Sale or gift of shares to another person
f) Private company collecting capital privately
g) Rights issue
h) Registered document
i) Public company collecting capital privately
j) Less applications than expected
Ans. (1-h),(2-a),(3-j),(4-e),(5-i)

4) A GROUP B GROUP
1) Rights issue a) Shares allotted to the Board of Directors
2) IPO b) Negotiable instrument
3) Share Warrant c) Secondary market
4) Bonus issue d) Application letter
5) Regret letter e) Partial issue
f) Shares allotted to existing shareholders
g) Non Negotiable instrument
h) Shares issued at free of cost
i) Refund order
j) Primary market
Ans. (1-f),(2-j),(3-b),(4-h),(5-i)

5) A GROUP B GROUP
1) Employee stock option a) Board of Directors
2) Oversubscription b) Conversion of shares to stock
3) Allotment of shares c) Control over stock exchanges
4) Transmission of shares d) Shares issued at more than face value
5) Issue at par e) More capital
f) Transmission of ownership shares due to operation of law
g) Less capital
h) Shares issued at face value
i) Employee participation in business
j) Refund of money
Ans. (1-i),(2-r),(3-a),(4-f),(5-h)

Q.9 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1) Capital collected by way of issue of Equity and Preference shares.
*2) Part of issued capital subscribed by investors.
*3) Capital that will be collected only at the time of winding up of a company.
*4) Highest bid price in Book Building method.
*5) Offering of shares by a company to the public for the first time.
*6) Subsequent issue of shares after an IPO.
*7) Pre-emptive right given to existing Equity shareholders to subscribe to new issue of shares by company.
*8) It is also called as ‘Capitalisation of Profits’.
*9) Appropriation of shares to an applicant.
*10) Committee set up to decide the formula for allotment of shares in case of over subscription.
*11) Minimum amount to be collected from subscribers within thirty days of issue of prospectus.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 50 - STANDARD 12TH
*12) Document which is a prima facie evidence of ownership of certain shares of a company.
*13) Penal action taken by company on non-payment of calls.
*14) Person to whom transferor is transferring the shares.
*15) Transfer of shares due to operation of law.
16) A letter which informs the applicant that shares are allotted to him
17) a letter which informs the applicant that shares are not alloted to him
18) Passing ownership of shares form shareholders to another person voluntarily
19) A document which it is an invitation to general public to subscribe for shares of a company
20) Money paid along with application of shares
21) The authority which has right to make call on shares
22) Giving shares to share applicant or specific person with whom company has entered into contract

ANS 1) Share capital 2) Subscribed Capital 3) Reserve Capital 4) Cap Price 5) IPO 6)
FPO 7) Rights issue/shares 8) Bonus shares 9) Allotment of shares 10) Allotment committee
11) Minimum subscription 12) share certificate 13) forfeiture of shares 14) Transferee 15)
Transmission of shares 16) Letter of allotment 17) Letter of Regret 18) Transfer of shares
19) Prospectus 20) Application money 21) Board of director 22) Allotment of shares

Q.10 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Only fully paidup shares can be forfeited.
*2) The member transferring shares is called as transferor.
*3) Share certificate is issued for partly or fully paid up shares.
*4) Allotment of shares must be done within one month of receipt of application money.
*5) Sweat Equity shares are offered to Directors or employees of a company.
*6) Bonus Shares are issued at a discounted price to the Equity shareholders.
*7) Floor price is the highest bid price under Book Building method.
*8) Calls not paid by shareholder is called as calls in arrears.
*9) Shares not offered to the public for subscription is called as subscribed capital.
*10) Authorised capital is mentioned in capital clause of Memorandum of Association.

ANS.
TRUE : 2, 3, 5, 8, 10
FALSE : 1, 4, 6, 7, 9

Q.11 FIND THE ODD ONE (ONE MARKS EACH)

*1) Authorised capital, Equity share capital, Issued capital, Paidup capital.
*2) ESOS, ESPS, Rights Shares, Sweat Equity.
*3) Floor Price, Cap price, Cut-off price, Face Value.
*4) Bonus shares, Rights Shares, ESOS.
*5) Allotment of shares, Forfeiture of shares, Surrender of shares.
6) IPO, FPO, ESPS
7) ESOS, ESPS, Bonus Shares, Sweat Equity

Q.12 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Share capital refers to capital made up of Equity shares and .......................... .
*2) Reserve capital is part of .......................... .
*3) Transfer of shares due to death, insolvency or insanity of member is called .......................... .
*4) The two parties involved in transfer of shares are transferor and .......................... .
*5) Voluntarily giving up of shares by a member due to inability to pay calls is called as.......................... .
*6) Company can forfeit only .......................... paid shares.
*7) In case the original Share Certificate is torn or mutilated, company can issue .......................... .
*8) In case of transfer of shares, company has to issue to the transferee a new share certificate within ..........................
*9) Letter sent to applicants for informing them shares are allotted is called as ......................... .
*10) When applications received are more than the number of shares offered, it is called as) .......................... .

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 51 - STANDARD 12TH
*11) In Book Building Method, the final price at which shares are offered to investors is called as .......................... .
*12) Shares issued free of cost to existing Equity shareholders is called as .......................... .
ANS. 1) Preference shares 2) Uncalled capital 3) Transmission of shares 4) Transferee 5)
Surrender of shares 6) Partly 7) Duplicate share certificate 8) One month 9)Letter of
Allotment 10) Over subscription 11) cut off price 12) Bonus shares

Q.13 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Public offer of shares a) …………..
2) ………………. b) Initial Public Offer
3) Rights Issue c) ………….
4) ……………… d) ESOS
5) Operation of law e) ……………
((First time offer of shares, Shares offered to public, Shares offered to existing Equity shareholders, Shares offered to
existing employees, Transmission of shares)
ANS 1) Shares offered to public 2) First time offer of shares 3) Shares offered to existing Equity
shareholders 4) Shares offered to existing employees 5) Transmission of shares.

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) When does transmission of share take place ?
Ans. Transmission of shares takes place on death, insolvency or insanity of the members
*2) Name the parties involved in transfer of shares.
Ans. Transferor and transferee are the two parties involved in transfer of shares
*3) What is the time limit to issue share certificate on allotment of shares ?
Ans. Secretary should issue share certificate within two months of allotment of shares
*4) What is the time limit for filing Return of Allotment with the Registrar on allotment of shares ?
Ans. Secretary has to file a ‘Return of Allotment’ with the Registrar of Companies within 30 days of allotment of
shares
*5) When can a company forfeit shares ?
Ans. If a shareholder fails to pay calls on shares within a certain period company can forfeit shares
*6) What is a share certificate ?
Ans. Share certificate is a registered document issued by a company which is an evidence of ownership of specified
number of shares of the company
*7) What is the minimum application money to be collected by company as per the Companies Act ?
Ans. As per companies Act company should collect minimum 25% of the nominal value of shares
*8) With whom should the prospectus be filed before issuing it to the public ?
Ans. Prospectus should be filed with the Registrar of Companies before issuing it to the public
*9) What is meant by private placement ?
Ans. When a company offers its securities to a select group of persons not exceeding 200, it is called Private
Placement
*10) To whom is Sweat Equity Shares offered by a company ?
Ans. Sweat Equity shares are issued to directors or employees of the company
*11) To whom can a company issue Bonus Shares ?
Ans. Company can issue Bonus Shares to its existing equity shares holders
*12) What is the subsequent issue after IPO called as ?
Ans. The subsequent issue after IPO is called as FPO
*13) Name the method under which the issue price of shares is fixed through a bidding process.
Ans. Under Book Building Method, the issue price of shares is fixed through a bidding process.
*14) What is Public Issue ?
Ans. Public issue or offer means offering the shares to the public. The company invites the public to subscribe for its
shares by issuing prospectus.
*15) Name the capital which is mentioned in the capital clause of Memorandum of Association.
Ans. Authorised capital is mentioned in the clause of Memorandum of Association

Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 52 - STANDARD 12TH
*1) Issued capital is the maximum capital which a company can raise by issuing shares.
Ans. Authorised Capital
*2) Under Fixed price issue method, the price of shares is fixed through bidding process.
Ans. Book Building Method
*3) FPO refers to offering of shares to the public for the first time.
Ans. IPO
*4) Only fully paid up shares can be forfeited.
Ans. Partly paid up
*5) Bonus shares are offered to existing employees of a company.
Ans. shareholders
*6) Company enters into an underwriting agreement with the shareholders
Ans. underwriters
7) IPO refers to offering of shares to the public for the second time.
Ans. FPO
8) Rights shares are offered to existing employees of a company
Ans. shareholder
*9) Letter of Allotment is sent to the applicants when no shares are allotted to them
Ans. Letter of Regret
*10)Duplicate share certificate must be issued within one month from date of application.
Ans. three
*11) Letter of Regret should be sent to applicant whom shares are allocated.
Ans. Letter of Allotment
*12) Transfer of Shares is done by Operation of Law
Ans. Transmission of shares
*13) Call money cannot exceed 5% of nominal value of shares.
Ans. 25%

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Forfeiture of shares, calls on shares, allotment of shares
Ans. Allotment of shares, Calls on shares, Forfeiture of shares
*2) Share Certificate, Allotment Letter, Application Form
Ans. Application Form, Allotment Letter, Share Certificate
*3) Return on allotment, Application Form, Minimum Subscription,
Ans. Minimum Subscription, Application Form, Return of Allotment

CHAPTER 4. ISSUE OF DEBENTURES

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Briefly Explain the Provisions of Companies Act 2013, for issue of Debentures (OR) State the statutory
provisions related to issue of Debentures
Ans. Company can issue debentures to the public. But to issue debentures companies need to follow provisions.
Following are some of the provisions of the Act which a company has to comply while issuing debentures :
1) No voting rights : A company cannot issue debentures with voting rights. Debenture holders are
creditors of the company and so they do not have any voting rights except in matters affecting them.
2) Types of Debentures : A company can issue secured or unsecured debentures and fully or partly convertible
debentures or non-convertible debentures. To issue convertible debentures, a Special Resolution has to be passed in
the General Meeting. All debentures are redeemable in nature.
3) Payment of interest and redemption : A company shall redeem the debentures and pay interest as per the
terms and conditions of their issue.
4) Debenture Certificate : Company has to issue Debenture certificate to the debenture holders within 6
months of allotment of Debentures.
5) Create Debenture Redemption Reserve : Company has to create a Debenture Redemption Reserve
account out of profits of the company available for payment of dividend. This money can be used only for redemption
of debentures. As per companies (Share Capital and Debentures) Amendment Rules 2019, MCA(Ministry of
Corporate affairs) has removed Debenture Redemption Reserve requirement for Listed companies, NBFCs and
Housing Finance Companies.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 53 - STANDARD 12TH
6) Appoint of Debenture Trustees : If the company issues prospectus or invites more than 500 people,
(either to Public or its Member) company has to appoint one or more Debenture Trustees. Debenture trustees protect
the interest of the debenture holders. Company has to appoint trustees by entering into a contract with them called as
Debenture Trust Deed.
7) Debentures Trustees can approach NCLT : Debenture Trustees have to redress(solve) the
grievances(complaints) of debenture holders. If the company defaults in repaying the principal amount, on maturity or
defaults in paying interest there on, the Debenture Trustees can approach the National Company Law Tribunal for
redressal. NCLT can direct a defaulting company to repay the principal amount or interest.
8) Impose restrictions : When the Debenture Trustee is of the opinion that the assets of the
company are insufficient or likely to become insufficient to redeem the principal amount of debentures, it may
approach the NCLT. NCLT can order a company to restrict incurring further liabilities so as to protect the interest of
the debenture holders.
9) Punishment for contravention of provisions of the Companies Act : If the company fails to comply with
any provisions of the Act, then the company and its officers shall be liable to pay fine or imprisonment or both as
prescribed in the Act.

*II) Explain Briefly the procedure for issue of debentures

Ans. A Company Secretary is mainly responsible to supervise the procedure of issue of debentures. As the employee
of the company, the secretary has to look into the matter that company complies with all the provisions
Following is the procedure to be followed by a company issuing debentures
1) Pass resolution in Board Meeting : In the Board Meeting following resolution will have to be passed :
i) amount and type of debentures to be issued and the terms and conditions for issue.
ii) approve prospectus or offer letter or letter of offer.
iii) approve appointment of Debenture Trustees and get their written consent.
iv) authorize Board to create charge on assets of the company.
v) call Extra-ordinary General Meeting if the Board’s borrowing powers need to be increased.
vi) authorizes Board to open a separate bank account for receiving money from applicants.
2) Hold Extra-ordinary General Meeting (EGM) : If the borrowing powers of the Board is to be increased,
EGM must be held to get the shareholders’ approval through a Special Resolution.
3) Filing with Registrar of Companies : Secretary has to file the Special resolution and copy of
Prospectus, offer letter / Letter of offer with Registrar of Companies within 30 days of Board Meeting.
4) Obtain Credit Rating : Company gets its debentures rated by one or more Credit Rating Agencies. The
ratings must be mentioned in the prospectus/offer letter/Letter of offer.
5) Enter into underwriting agreement : Company enters into an underwriting agreement for underwriting
its debenture issue.
6) Issue prospectus / letter of offer / offer letter : Company issues prospectus, if it is inviting the public to buy
its debentures. Offer Letter is issued if a company makes private placement and Letter of offer for Rights Issue.
7) Open Separate Bank Account : Company opens a separate bank account in a scheduled Bank to receive the
money from the applicants.
8) Receiving application money : Subscribers will submit their application along with the required amount to
the specified bank within the time period mentioned in the prospectus or letter of offer / Offer Letter.
9) Hold Board Meeting : After the issue closes, a Board Meeting is held to decide and approve allotment
of debentures. Board also approves creation of charges on the company’s assets.
10) Issue of Debenture certificate : The allotment procedure has to be completed within 60 days from the
receipt of application money. Company has to issue Debenture certificate within 6 months of allotment of debentures.
11) Make entries in Register of Debenture holders : Secretary has to make entries in the Register of
Debenture holders within 7 days after the Board approval of allotment. However, if debentures are issued in demat
form, company does not maintain the Register of Debenture holders.

Q.2 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) A company has to create charge on its asset for issuing secured debentures
Reasons. A) A debentures is a debt instrument, which helps the company to raise long term loan b) A secured
debenture is a debenture against which charge has been created. C) In case, if company has failed to make
redemption of debenture or interest, in that case by the order of NCLT, the charged asset can be realized by the
company and dues can be settled.
Thus, it is rightly said that, a company has to create charge on its asset for issuing secured debenture.

*II) Company can list its debentures on stock exchange

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 54 - STANDARD 12TH
Reasons. A) a company can issue secured as well as unsecured debentures. B) Debentures are issued to general
public c) Company can issue debentures to its members through public offer or offer through private placement.
D) Company gets its debentures rate by one or more credit rating agencies which attracts the general public or
members of the company
Thus, it is rightly said that company can list its debentures on Stock Exchange

III) Debenture holders do not enjoy any voting rights

Reasons. A) Company borrow large amount of money by issuing debentures. B) Debentures are considered to be
long term loan which are repaid after a long period C) Debenture holders are the creditors of the company D)
Company has to pay interest to the debenture holders even if the company makes loss in the current year.
Thus, it is rightly said that debenture holders do not enjoy any voting rights.

*IV) Debenture trustees are appointed by company for issuing debentures

Reasons. A) Debenture trustees are appointed when the company issues prospectus or invites more than 500 people
B) They are appointed to protect the interest and redress the complaints of debenture holders. C) Debenture
trustees acts as a custodian of assets and create a charge on assets of the company can behalf of the debenture holders.
D) In case, company failed to redemption of debenture or its interest, then debenture trustees by the order of NCLT
can realized the assets and settle the dues.
Thus it is rightly said that, debenture trustees are appointed by company for issuing debentures.

*V) A company can issue only certain types of debentures

Reasons. A) Debenture holders are the creditors of the company. They offered borrowed capital to company but
cannot participate in the management of the company. B) So, in order to protect the interest of debenture holders,
SEBI, through its guidelines allowing companies to issue certain types of debentures in India. C) so, the companies
operating in India can issue secured debentures, convertible debentures, redeemable debentures to the applicant.
D) It protect the interest of creditors in company.
Thus, it is rightly said that a company can issue only certain types of debentures.

VI) Debenture Redemption Reserve account used for redemption of debentures

Reasons. A) Debenture redemption Reserve is created from the profits earned by the company. B) Company has
to maintain atleast 25% of the value for the outstanding debentures in the DRR account. C) Similarly, every year
on or before 31st March, company has to invest or deposit a sum of not less than 15% in DRR account for the maturing
debentures in the next year.
Thus, it is rightly said that, Debenture Redemption Reserve Account is used for redemption of debentures.

VII) Members as well as Debenture holders can inspect the debenture trust deed.
Reasons. A) Company enter into the contract with the debenture trustees which is called as ‘Debenture Trust Deed’.
B) It is a legal instrument conveying the assets of the company of the trustees. C) The deed includes the rights of
debenture holders and the duties and powers of debenture trustees. D) It contains terms and conditions agreed
between the company and debenture trustee.
Thus, it is rightly said that, members as well as debenture holders can inspect the debenture trust deed.

Q.3 ANSWER IN BRIEF . (FOUR MARKS EACH)

I) Define Debenture and State its meaning

Ans . According to Sec 82 of the Company Act 1956, ‘Debenture to any member of the company is a moveable
propety transferable in the manner provided by the Articles of Association.’
Meaning : Debenture is an acknowledgement of ‘debt’ issued by the company under its common seal.
One of the effective, safe and promising means of raising borrowed cpaital is debenture. Compnay collects
long term loan by issuing debentures.
In short we may say that “a debenture is a certificate issued by the company to its creditors promising the
payment of a stated amount as interest after specified period of time.”
Features
a) Borrowed capital : It is borrowed capital of the company. Debentureholders are creditors of the company.
b) Acknowledgement of debt : Debentured is defined as acknowledgement of debts. Thus, a debenture is document
with evidence of loan, issued by company under its common seal.
c) No voting rights : Sec 117 of Company Act provides that debentures do not have voting rights.
d) Interest as reward : the interest on debentures is a reward or return to the debenture holders. Interest has to be
paid regularly whether there is profit or not.,
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 55 - STANDARD 12TH
e) Debenture certificate : Debentureholders are issued debenture certificate as a proof.
f) Timespan : normally debentures are issued for the time span ranging from 3 to 10 years.
g) Charge : Debenture generally contains charge on the assets of the undertaking or some class of assets or even part
of its profits or there may not be charge like unsecured debentures. Charge may be floating or fixed. Debentureholder
can sell the property if the company fails to pay the dues.
h) Conversion : Debentures can be converted into equity shares at the option of the debentureholder in the case of
convertible debentures.
i) Register of Debentureholders : A company must maintain the Register of debentureholder at the Registered office
of the company.

II) State the provisions as per Companies (Share Capital and Debenture) Rules 2014(
Ans . If a company issued secured debenture, then it has to follow Rule 18 of Companies Rules 2014.
Provisions as per Companies (Share Capital and Debentures) Rules, 2014 (i.e. Rule 18)
If a company issues secured debentures, company must fulfill the following conditions :
1) Tenure of secured debentures : All secured debentures should be redeemed within 10 years from the
date of its issue. Only certain companies like companies engaged in Infrastructure Projects, or companies permitted by
the Ministry of Corporate Affairs, Central Govt. or RBI can issue debentures beyond a period of 10 years but not
exceeding 30 years.
2) Create charge on assets : Company has to create a charge on the assets of the company or its subsidiary
company or holding company. The value of charge should be adequate to cover the entire value of debentures issued
and interest to be paid on it. If a Government company issues secured debentures which has Central or State
Government’s guarantee, then it need not create any charge on its assets.
3) Appointment of Debenture Trustees : Before issuing prospectus or offer letter, the company has to appoint
a Debenture Trustee. Company also has to execute a Debenture Trust Deed either before issuing prospectus or offer
letter or within 60 days from the allotment of debentures. The Deed contains the terms and conditions agreed upon by
the company and the Trustees and clearly states the role of the Debenture Trustee.
4) Create Debenture Redemption Reserve : Company has to create a Debenture Redemption Reserve account
out of the profits available for payment of debentures. Company has to maintain at least 25% of the value of its
outstanding debentures in the Debenture Redemption Reserve Account.
Company has to invest or deposit on or before 30th April each year, a sum not less than 15% of the amount of
its debentures maturing during the year ending on 31st March of the next year. Money from this account is used for
redemption of debentures.

III) What are/Explain the requirement of SEBI for issue of debentures?

Ans . Following are the requirements as per SEBI for issue of debentures in the market
Requirements as per SEBI for issue of Debentures :
1) Minimum subscription : SEBI (Issue and Listing of Debt securities) Regulation, 2008 Regulation-12 state
the minimum subscription to be collected by a company.
As per SEBI, the minimum subscription for public issue of debentures is 75% of base issue size i.e. Rs. 100
crores. If the minimum subscription is not received, the entire money received should be refunded within 12 days from
the date of closure of the issue.
2) Retention of over subscription : Company can retain over subscription money up to maximum 100 % of
the base issue size or any lower unit as specified in the offer letter or letter of offer or prospectus.
3) Underwriting : Company may enter into an underwriting agreement with underwriters for its public issue
of debentures. Appointment of underwriters must be mentioned in the offer letter or letter of offer or prospectus.
4) Credit Rating : SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 states that
companies should get credit rating for issuing debentures.
As per SEBI, Companies making a public issue or right issue of convertible debentures must obtain credit
rating from one or more credit rating agencies. The rating should be mentioned in the offer letter or letter of offer or
prospectus.

*IV) State any four provisions of Company Act ?

Ans . Refer To Q. 1(I)

*V) What is Debenture Trust Deed? (OR) Write note on : Debenture Trust Deed
Ans . DEBENTURE TRUST DEED :
Company enters into a contract with one or more Debenture Trustees. The terms and conditions of the
agreement is written in the Debenture Trust Deed. It is a legal instrument conveying the assets of a company to the
Trustees.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 56 - STANDARD 12TH
The Deed also defines the rights of debenture holders and the duties and powers of Debenture Trustees.
Company has to execute the Deed within 3 months of closure of the issue. Members as well as debenture holders can
inspect the deed and also get a copy of it by paying a certain fee.

*VI) Who are Debenture Trustees> (OR) Explain the Role of Debenture Trustees. (OR) Write a note on
Debenture Trustee
Ans . DEBENTURE TRUSTEES :
A company which issues prospectuses or invites more than 500 persons to buy its debentures has to appoint
one or more Debenture Trustees. Companies issuing secured debentures also must appoint Debentures Trustees.
Debentures Trustees are institutions which protect the interest of the debenture holders. The company creates
a charge on its movable or immovable assets or assets of its subsidiary company or holding company. Charge is
created in favour of the Debenture Trustees. The Trustees become the custodian of the assets on which charge has
been created.
Debenture Trustees is appointed before prospectus or letter of offer/offer letter is issued or within 60 days
after the allotment of debenture. The Trustees must give a written consent to act as Debenture Trustees. The
prospectus or letter of offer/offer letter must mention the names of Debenture Trustees.

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*1) Rose limited company proposes to issue debenture to the public to raise funds. After discussions, the Board
of directors have decided to issue secured, Redeemable non- convertible debentures with a tenure of Ten years.
Please advise the board on following matters :
A) Should the company appoint Debenture trustee ?
Ans. company should appoint debenture trustees as they are responsible to protect interest of debenture holders and
they are the link between company and debenture holders.
B) Should the company create a charge on its assets ?
Ans. Company should create a charge on its assets because if company failed to repay the amount to debenture
holders, assets can be realized and claim can be settled.
C) Can the tenure of debentures be less than ten years ?
Ans. the maximum tenure of redemption of secured debenture is 10 years. It can be less than 10 years. It shows
strong liquidity position of a company.

*2) Violet Ltd. company plans to raise Rs 10 crores by issuing debentures. The Board of Directors have some
queries. Please advise them on the following
A) Can the company issue unsecured debentures?
Ans. In India, as per the guidelines of SEBI, issue of unsecured debentures is prohibited. So, company cant issue
unsecured debentures.
B) Can they issue irredeemable debentures?
Ans. Company can issue irredeemable debentures if it is permitted by Ministry or department of central government
or by RBI. It can be issued for maximum period of 30 years
C) As the company is offering debentures to its members, can such debentures have normal voting rights ?
Ans. As the company is offering debentures to its members, such debenture shave no normal voting rights. It can
enjoy the voting rights on the matters associated with them.

3) DDS financial plans to raise Rs. 10 crores by issuing secured, Non-convertible debentures. However, as per
the Articles of Association, the board of directors have 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
A) What can be the maximum tenure of the debentures to be issued ?
Ans. All the secured debenture should be redeemed for 10 years. Only those companies permitted by RBI/Dept. of
Corporate Affairs can issue debentures more than 10 years but less than 30 years.
B) Is the proposed issue within the borrowing powers of the board ?
Ans. The proposed issue is not within the borrowing powers of Board of Directors. If they want to increase its
borrowing powers, they have to get the approval of shareholders.
C) Within what period should company issue Debenture certificate ?
Ans. Debenture certificate should be issued within 6 months from the date of allotment of debentures.

4) ABC Ltd. Is going to redeem its 1000 debentures of Rs. 100/- each. Please advice them on the following
A) Which fund should be created by the company to redeem debentures?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 57 - STANDARD 12TH
Ans. The company should create Debenture Redemption Reserve to redeem debentures.
B) Can debentures trustees consult to NCLT if company is at default?
Ans. If company is at default regarding repayment of debentures, then Debenture trustees can consult the NCLT.
C) What will be the change in register of debenture holders?
Ans. If debentures are redeemed, their entries will be cancelled from register.

5) Zeal company Ltd. Is going to issue 2000 debentures. Please advice them on the following
A) Do the company have to list the debentures on stock exchange?
Ans. Yes, the company has to list the debentures on stock exchange.
B) Should the company get credit rating for issuing debentures?
Ans. Yes, the company should get credit rating for issuing debenture and from SEBI.
C) Can the company show credit rating in the prospectus?
Ans. Yes, the credit rating should be mentioned in the prospectus/offer letter/ letter of offer..

Q.6 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Debenture Certificate

Ans. debenture certificate is an acknowledgement issued by company with its common seal and signature against
debenture issued. It includes all the information of debenture issued, its face value, rate of interest details of debenture
holder, etc. Debenture certificate should be issued by the company within 6 months form debenture allotment.

*II) Debenture Trustee

Ans. Debentures Trustees are institutions which protect the interest of the debenture holders. A company which
issues prospectuses or invites more than 500 persons to buy its debentures has to appoint one or more Debenture
Trustees.
Company issuing secured debentures also must appoint debenture trustee. Company enters into contract with
debenture trustee.

III) Debentures
Ans. Company raises capital by borrowing money from the public or its members. It is a proof of loan taken by the
company. A person who purchases debenture is called as debenture holder. Interest is paid to the debenture holders.

*IV) Charge on Assets

Ans. Charge on assets means the right of lender to be paid from a borrowers asset, if the debt is not paid on time.
Every year the company must report its total debts secured by a charge on asset. The value of charge should be
sufficient to cover entire of debenture issued.

*V) Debenture Trust Deed

Ans. Debenture Trust Deed is an agreement between company and debenture trustees. It is legal instrument stating a
relationship between company and trustee. It covers all terms of conditions to be followed by debenture trustees.

VI) Debenture Redemption Reserve

Ans. Debenture Redemption Reserve is useful to redemption of debenture. It is created out of profit of the company
which has maintained 25% minimum of the value of outstanding debenture in DRR

VII) Minimum Subscription

Ans. Minimum subscription is a term which is used to represent the amount of the issue which has to be subscribed or
else the shares can’t be issued, if it is not being subscribed.

VIII) Underwriting
Ans. Underwriting contract is a contract between an underwriter and issuer of securities. It is helpful to issuer
companies when securities are not being subscribed by the public. Here, underwriters guarantees the sale of issued
stock at agreed price.

IX) Credit Rating

Ans. It is an estimation of the ability of a person or organization to fulfill their financial requirement, commitments
based on previous dealings. Credit Rating Agencies are responsible to credit Rating.

X) Secured Debentures
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 58 - STANDARD 12TH
Ans. Secured Debentures are bonds that are issued with collateral securities. Here, charge is created against the assets
of the company. If company is in default assets can be realized to recover the dues.

Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) A company raises debt capital through the issue of …………….
a) Equity shares b) preference shares c) debentures
2) Debenture holder is …………..of the company.
a) owner b) Debtor c) creditor
3) Debenture holder get income in the form of………..
a) Dividend b) Interest c) Bonus
4) Power to issue debenture rests with …………
a) Chairman b) Secretary c) Board of Director
5) The word ‘Debeture’ is derived from the Latin word ……..
a) Debere b) Debenture c) Debire
*6) A company cannot issue .................. with voting rights.
a)Equity shares b) Debentures c) Securities
*7) A company can issue .................. convertible debentures.
a) Only partly b) Only fully c) Partly or fully
*8) Money from .................. Account is used for redemption of debentures
a) Capital b) Debenture Redemption Reserve c) Profit or loss
9) Debenture cannot be redeemed ……………..
a) at par b) at premium c) at discount
10) The company has to obtain consent of ……………if issue of debenture exceeds Rs. 1/-
a) SEBI b) Registrar c) National Stock Exchange
11) Debenture certificate must be issued within …………months of allotment
a) 3 b) 6 c) 9
12) The………….is an advertisement for the issue of debenture
a) memorandum of association b) articles of association c) prospectus
*13) .................. protects the interest of debenture holders
a) Debenture Trustees b) Debenture holders c) Redemption Reserve
*14) Secured debentures must be redeemed within .................. from the date of its issue
a)10 days b) 10 years c) 15 years
*15) A company issuing……… debenture must create a charge on the assets of the company.
a) Secured b) Unsecured c) Redeemable
*16) Debenture certificate must be issued within .................. of allotment of debentures.
a) 3 months b) 6 months c) 60 days
*17) The details of allotment of Debentures must be entered in .................. .
a) Register of debenture b) Register of members c) Register of creditors
18) Debenture holders is entitled to receive………….certificate from the company
a) share b) Debenture c) Dividend
19) Fully convertible debentures are converted into…………shares on maturity.
a) equity b) Deferred c) bonus
20) A return of allotment is filed with the Registrar within …………days of allotment.
a) 30 b) 60 c) 90
21) The…………….can direct the company to repay the principal amount of debenture with interest.
a) Company Law Board b) Registrar c) Shareholders
22) In order to redeem old debenture the company issues………
a) Assets b) Public Deposits c) Fresh debenture
*23) A company which issues prospectus or invites more than 500 persons to buy its debenture has to
appoint .................. .
a) Register of companies b) Debenture holders c) Debenture trustees
*24) The contract between company and Debenture trustees of companies is called as ..................
a) Debenture trust deed b) Letter of offer c) Prospectus
*25) Procedure for allotment of Debenture should be completed within .................. from the date of receipt of
applications.
a) 6 months b) 3 months c) 60 days

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 59 - STANDARD 12TH
Q.8 MATCH THE PAIR(ONE MARKS EACH)
*1) A GROUP B GROUP
1) Debenture trustee a) No voting rights
2) Debenture b) ICRA
3) Convertible debenture c) Security about repayment
4) Secured debenture d) CARE
5) Debenture holder e) Equity shares
f) Borrowed capital
g) Protect Debenture holder
Ans. (1-g),(2-f),(3-e),(4-c),(5-a)

2) A GROUP B GROUP
1) Charge on Asset a) Credit Rating
2) Redeemable debenture b) Secured Debentures
3) Board of Directors c) 90 days
4) CRISIL d) Power to issue debentures
5) Debenture certificate e) Unsecured Debentures
f) Repaid on maturity
g) 6 months
Ans. (1-b),(2-f),(3-d),(4-a),(5-g)

3) A GROUP B GROUP
1) Board of Directors a) Within 6 months after allotment
2) Debentures b) No voting rights
3) Debenture holder c) Application of debentures
4) CARE d) Interest
5) Debenture certificate e) Voting rights
f) within 120 days after allotment
g) Credit rating agency
h) Dividend
i) SEBI
j) Creditors
Ans. (1-c),(2-d),(3-b),(4-g),(5-a)

4) A GROUP B GROUP
1) Trust Deed a) Owner
2) Debenture certificate b) Deed for Debenture holders
3) Secured |Debenture c) Charge on company’s assets
4) Redemption by annual installment d) Creditors of the company
5) Debenture holders e) Signature of two directors
f) Two coupons
g) Deed for depositors
h) No charge on company assets
i) CARE
j) Credit Rating
Ans. (1-b),(2-e),(3-c),(4-f),(5-d)
Q.9 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE
EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1) Type of resolution needed to issue convertible debentures.
*2) Account to be created for redemption of debentures.
*3) Institution appointed by company to protect the interest of debenture holders.
4) Provision dealing with issue of debentures
5) Name of capital controller in India
6) Debenture converted in equity shares
7) Redemption time of secured debentures
*8) Period within which secured debentures should be redeemed.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 60 - STANDARD 12TH
*9) Type of debentures on which company has to create a charge on its assets.
*10) The document which contains terms and conditions agreed upon by the company and the Debenture trustees.
11) Authority which listing the debentures
12) Application received more than issue
13) Authority consulted by Debenture Trustee
14) Agency which provides credit rating of security
*15) Time period within which the procedure for allotment of debenture is to be completed from the date of receipt
of applications.
*16) Period within which debenture certificate must be issued by a company.
*17) Institution which redresses grievances of debenture holders.
*18) Authority which has power to issue debentures.
19) Register of Entries of Debenture
20) Meeting conducted in emergency

ANS 1) Special Resolution 2) Debenture Redemption Reserve Account 3) Debenture Trustee 4)

Section 71 of Companies Act 2013 5) SEBI 6) Convertible Debenture 7) 10 years 8) 10 years
9) Secured Debenture 10) Debenture Trust Deed 11) Stock exchange 12) Over subscription 13)
NCLT 14) Credit Rating Agency 15) 60 days 16) 6 months 17) Debenture Trustee/ NCLT
18) Board of Directors 19) Register of debentures 20) Extra ordinary General Meeting

Q.10 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Debenture holders have no voting rights.
*2) Company cannot issue non-convertible debentures.
*3) Special Resolution is needed to issue convertible debentures.
*4) Debentures holders are paid interest.
5) Debenture holders are the creditors of the company
6) Board has no power to issue debentures
7) Debenture helps to raise borrowed capital
8) Debenture holders enjoy normal voting rights
*9) Debenture Trustees can not approach NCLT to redress grievances of debenture holders..
*10) All secured debentures should be redeemed within 20 years from date of its issue.
*11) Company has to create a charge on its assets when it issues secured debentures.
*12) Debenture certificate should issue within 6 months
13) Debenture is a permanent capital
*14) Debenture trustees are appointed to protect the interest of shareholders.
15) Debenture trustee is a link between company and debenture holder
16) Appointment of underwriter is compulsory
17) Listing of Debenture is compulsory
18) SEBI has contract over security market
19) Allotment procedure should be completed within 60 days
20) Debenture Trust Deed is a legal Agreement
*21) After allotment of Debentures their names are entered in the register of me mbers.

ANS.
TRUE : 1, 3, 4, 5, 7, 11, 12, 15, 17, 18, 19, 20, 21
FALSE : 2, 6,8, 9, 10, 13, 14, 16,

Q.11 FIND THE ODD ONE (ONE MARKS EACH)

*1) Debenture holders, Interest, Dividend.
2) SEBI, NCLT, SBI
*3) Debenture Trustees, Court, NCLT.
4) 25%, 15%, 10%
*5) Secured Debentures, Convertible debentures, Irredeemable debentures.
6) CARE, CRISIL, SEBI
*7) Debenture trustees, Trust Deed, Shareholders.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 61 - STANDARD 12TH
8) Credit Rating agency, Stock Exchange, SBI
9) SEBI, NCLT, CRISIL
10) Debenture Certificate, Trust Deed, Share certificate

Q.12 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1)A legal instrument conveying the assets of a company to the Debenture trustees is called.......................... .
*2) To protect the interest of Debenture holders, a company appoints .......................... .
*3) On receipt of application and money, the procedure for allotment of debentures should be completed
within .......................... .
*4) Authority to create charge on company’s assets is with the .......................... .
*5) Secured debentures should be redeemed within .......................... .
*6) To stop a company from incurring further liabilities, the Debenture trustee can approach.......................... .
7) Debenture holder has no…………rights
8) CRISIL is responsible to………of securities
9) Company enters into…………….with underwriter.
*10) A company which issues prospectus or invites more than 500 persons to subscribe for its debentures, has to
appoint .......................... .
*11) Return on investment on debenture is called .......................... .
*12) For public issue of debentures of Rs 100 crores, minimum subscription should be ...................
*13) For public issue or rights issue of convertible debentures, as per SEBI, a company must obtain .......................... .
14) ………..is needed to increase borrowing power.
15) If borrowing power of board is to be increased ………..must be held.

ANS. 1) Debenture Trust Deed 2) Debenture Trustee 3) 60 days 4) Debenture Trustee 5)

10 years 6) NCLT 7) Voting 8) Credit Rating 9) Underwriting Agreement 10) Debenture
Trustee 11) Interest 12) 75% 13) Consent of Shareholder 14) Special Resolution
15) Extra Ordinary General Meeting

Q.13 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Debenture Trustees a) …………..
2) ………………. b) Charge on assets
3) Register of Debenture c) ………….
4) ……………… d) Debenture Certificate
5) No voting rights e) ……………
(Issued within 5 months of allotment, Names of Debenture holders, Secured Debentures, Trust Deed, Debenture
Holders.)
ANS 1) Trust Deed 2) Secured debentures 3) Name of Debenture Holder 4) Issued within 6
months of allotment 5) Debenture holder.

*2) A GROUP B GROUP

1) Board of Director a) …………..
2) ………………. b) Interest
3) Debenture holders c) ………….
4) ……………… d) Credit Rating Agency
5) Debenture certificate e) ……………
(Debenture, Application of Debenture, No Voting Rights, 6 months, CARE.)
ANS 1) Application of Debenture 2) Debenture 3) No Voting Rights 4) CARE 5) 6 months.

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) Who are debenture holders?
Ans. Debenture holders are the applicants, who purchase the debentures of company. They are the creditors of the
company.
2) What do debenture holders receive as a return on Investment.?
Ans. Debenture holders receive interest on investment
*3) Whom does the company appoint to protect the interest of debenture holders?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 62 - STANDARD 12TH
Ans. Debenture trustees are appointed to protect the interest of debenture hodlers
*4) Within what period should secured debenture be redeemed?
Ans. within 100 years secured debenture should be redeemed.
*5) Name of the document which act as an agreement between company and trustee?
Ans. Debenture Trust Deed is a document which act as agreement between company and trustee
6) Who creates charge over asset?
Ans. Debenture Trustee can create charge over asset
*7) Name of the meeting in which approval for increasing the borrowing powers of Board is passed?
Ans. In Extra Ordinary General Meeting, Resolution regarding increase in borrowing powers of Board is passed.
*8) Within what period should the debenture certificate be issued?
Ans. A period of 6 months is required to issue debenture certificate
*9) When should company appoint credit rating agency?
Ans. In order of credit rating of securities, company can appoint Credit Rating Agency
10) When is permission of SEBI required.
Ans. When borrowing capital exceed 1 crore, consent of SEBI is required.

Q.15 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) The details of debentureholders are entered in Register of Members.
Ans. Register of Debenture
*2) Secured debentures must be redeemed within 15 years from the date of its issue.
Ans. 10 years
*3) A company issuing irredeemable debentures must create a charge on assets of the company.
Ans. Secured Debenture
*4) Return on investment on debentures is dividend.
Ans. Interest
*5) Debenture Trustees redress the grievances of shareholders.
Ans. Debentureholders
*6) Debenture certificates are issued within 3 months of allotment of debentures.
Ans. 6 months
*7) Procedure for allotment of debentures should be completed within 90 days from date of receipt of
applications.
Ans. 60 days
*8) To rate its debentures a company appoints underwriters.
Ans. Credit Rating Agency
9) Debenture holders get fluctuating interest.
Ans. Fixed
10) Convertible debenture holder can be converted in preference shares.
Ans. Equity shares
11) shareholders has a power to issue debenture
Ans. Board of Directors
12) Debenture Trust Deed is an illegal document
Ans. Legal
13) Debenture Trust issued by company within 3 months.
Ans. 6 months
14) Debenture holders are the owners of the company.
Ans. creditors
15) Debentrues generate owned capital to company.
Ans. Borrowed capital

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Obtain Credit Rating, Entry in register of debenture, Receive application with money
Ans. Obtain Credit Rating, Receive application with money, Entry in register of debenture
*2) Issue debenture Certificate, Issue Prospectus, Open Bank Account
Ans. Issue prospectus, Open Bank Account, Issue Debenture Certificate
*3) Hold Board Meeting for allotment, Issue Debenture Certificate, Receive Application with money
Ans. Hold Board Meeting for allotment, Receive application with money, Issue debenture certificate
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 63 - STANDARD 12TH
4) Offer Letter, Debenture trust Deed, written Consent
Ans.Offer Letter, Written Consent, Debenture Trust Deed
5) Allotment of debenture, Return with ROC, Debenture Certificate
Ans. Allotment of debenture, Debenture certificate, return with ROC
6) Issue of prospectus, Return with ROC, Underwriting Agreement
Ans. Issue of prospectus, Underwriting Agreement, Return with ROC
7) Board Meeting, Open Separate Bank Account, Extra Ordinary General Meeting
Ans. Board Meeting, Extra Ordinary General Meeting, Open Separate Bank Account
8) Receiving Application Money, Allotment of Debenture, Open Bank Account
Ans. Receiving Application Money, Open Bank Account, Allotment of Debenture
9) Preparation and Consent to prospectus, Filing with ROC, Special Resolution Passed
Ans. Special Resolution Passed, Preparation and consent to prospectus, Filing with ROC
10) Debenture Certificate, Entries in Register, Underwriting Contract
Ans. Underwriting Contract, Debenture Certificate, Entries in Register.

CHAPTER 5. DEPOSITS

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Explain the type of companies that can raise deposits along with the maximum amount they can raise as
deposits.
Ans. Company can accept deposits from both public and private companies. This acceptance of deposits of company
is further classified as

Acceptance of Deposits

From Members From Public

Private Public Company Eligible Public Eligible Public Government

Company (Other than company company company
Eligible company)

1) Amount of Deposit :
a) Private Company :
A Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100
percent of its aggregate of paid up share capital and free reserves.
However, certain class of Private Companies as specified by the Companies Act, can accept deposits more
than 100 percent of its aggregate of paid up share capital and free reserves.
b) Public Company (other than Eligible Company) :
These Companies cannot accept fresh deposit from members if the amount of such deposits together with the
previous deposits exceeds 25% of the aggregate of the paid up share capital and free reserves of the company.
c) Eligible Public Company :

Eligible Public Company

From the members From the Public

Cannot accept fresh deposits if the amount of cannot accept fresh deposits if the amount
Such deposits together with the previous deposits of such deposits together with previous
Exceeds 10% of aggregate of paid up share capital deposits exceeds 25% of aggregate of paid up
And free Reserves share capital and free Reserves
d) Government Company
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 64 - STANDARD 12TH
can accept deposits from public not exceeding 35% of the paid up share capital and free reserves of the company.

II) Explain terms and conditions for acceptance of deposits.

Ans. C1) Amount of Deposit :
a) Private Company :
A Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100
percent of its aggregate of paid up share capital and free reserves.
However, certain class of Private Companies as specified by the Companies Act, can accept deposits more
than 100 percent of its aggregate of paid up share capital and free reserves.
b) Public Company (other than Eligible Company) :
These Companies cannot accept fresh deposit from members if the amount of such deposits together with
the previous deposits exceeds 25% of the aggregate of the paid up share capital and free reserves of the company.
c) Eligible Public Company :

Eligible Public Company

From the members From the Public

Cannot accept fresh deposits if the amount of cannot accept fresh deposits if the amount
Such deposits together with the previous deposits of such deposits together with previous
Exceeds 10% of aggregate of paid up share capital deposits exceeds 25% of aggregate of paid up
And free Reserves share capital and free Reserves

d) Government Company
can accept deposits from public not exceeding 35% of the paid up share capital and free reserves of the
company.
2) Period / Tenure of Deposit : No deposit can be accepted or renewed which is to be repaid within a period
of six months or more than thirty six months.
In certain circumstances, a company may accept deposits repayable earlier than six months to meet its short
term needs. Such deposits must have a tenure of minimum three months and the amount of such deposits cannot be
more than 10% of aggregate of the paid up share capital and free reserves of the company. Under certain
circumstances, on the request of the depositor, company makes premature repayment of deposits. Company may also
renew its deposits with the same terms of issue and it will be considered as fresh deposits.
3) No demand deposit : Company cannot accept or renew deposits repayable on demand.
4) Secured or Unsecured Deposit : A company can accept secured or unsecured deposit which should be
clearly mentioned in the circular or advertisement inviting deposits. If a company offers secured deposits, it has to
create a charge on its tangible assets within 30 days of acceptance of deposits.
5) Application Form : A company has to provide application form. It should contain a declaration by the
applicant that the deposit he is making is not made out of any money borrowed by him from another person.
6) Joint names : Company can accept deposits in joint names of depositors. But there should not be more than
3 names.
7) Nomination : Every depositor at any time, has the right to nominate any person as nominee in the event of
death of the depositor.
8) Circular or Advertisement : If a company invites deposits from its members, it issues a circular. But if it
invites deposits from the public, company has to issue an advertisement.
a) Contents of circular or advertisement :
i) Statement about the financial position of the company
ii) The portion of secured and unsecured deposit of fresh issue
iii) Credit rating obtained from a Credit Rating Agency (only for eligible public company)
iv) Details of the scheme
v) Name of Deposit Trustees
vi) Amount due towards deposits of any previous deposits accepted by company
b) Filing of circular or advertisement with Registrar of Companies :
Company has to file a copy of circular or Advertisement signed by all directors with the Registrar of Companies.
c) Issue of circular or Advertisement : Only after 30 days of filing a copy of circular or Advertisement with
the Registrar of Companies, the company can issue the circular or advertisement.
Company can send the circular to the members through registered post, speed post or as email.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 65 - STANDARD 12TH
For inviting the public, company has to publish the advertisement in one English newspaper and one
vernacular newspaper having wide circulation in the state where the company’s registered office is located.
d) Validity of circular or advertisement : The circular or advertisement is valid for 6 months from the end
of the financial year in which it was issued or the date on which the Annual General Meeting was held, whichever is
earlier.
9) Appointment of Deposit Trustee : When issuing secured deposits, eligible companies and public
companies have to appoint one or more Deposit Trustees. The Trustees protect the interest of the depositor in case a
company defaults in repaying the depositors. Company signs a contract with the Deposit Trustees called as Trust
Deed. It contains the terms and conditions of the contract. The deed has to be signed at least 7 days before issuing
the circular or advertisement.
The Deposit Trustee on its own or on the request of one tenth of depositors, can call a meeting of all
depositors when a company defaults in repaying deposits.
10) Create charge on assets : A Company accepting secured deposit from public, within thirty days of
acceptance, has to create a charge on its tangible assets for an amount not less than the amount of deposit
accepted. The minimum amount of security should be equal to the amount not covered by Deposit Insurance.
The Security is created in favour of the Deposit trustees.
11) Deposit Insurance : A company needs to take Deposit Insurance at least 30 days before issue of circular
or advertisement. If the amount of Deposit plus interest on it is up to Rs. 20,000, insurance is to be taken.
12) Obtain credit rating : Every company has to get credit rating of its deposits and include the ratings in
the circular or advertisement. The Credit Rating Agency considers the net worth of the company, liquidity position,
ability to repay deposits on time etc. and accordingly gives a rating. Rating shall be obtained every year during the
tenure of the deposits.
13) Open Deposit Repayment Reserve Account : Every company accepting deposits, has to open in a
scheduled Bank, a Deposit Repayment Reserve Account. Every year, on or before 30th April, company has to deposit
an amount not less than 15% of the amount of deposits maturing during the current year and following financial
year. This account can be used only for repaying deposit.
(Note : Point 8 (a) and (b), 10 and 13 is not applicable to private companies which accepts deposits from its members
not exceeding 100% of aggregate of its paid up capital and Free Reserves.)
14) Deposit Receipt : Company has to issue Deposit Receipt to the depositors within twenty one (21) days
from date of receipt of money or realization of cheque. The receipt has to be signed by the officer duly authorized
by the Board of Directors. The Receipt contains the name and address of the depositor, amount of deposit, rate of
interest payable and date on which it is repayable.
15) Register of Deposit : A company has to maintain a separate Register for deposits accepted or renewed at
its registered office. The details of the deposit along with the details of the depositors should be entered in the
Register of Deposits within seven days from the date of issue of Deposit Receipt.
16) Return of Deposit : A company has to file, on or before 30th June every year, with the Registrar of
Companies a Return of Deposit. The Return gives details of deposit with the company as on 31st March of that
year.
17) Interest : The maximum rate of interest on deposits depends upon guidelines given by Reserve Bank of
India from time to time. In case of premature repayment of deposits, company can deduct 1% interest from the rate of
interest stated at the time of acceptance of deposit.
For deposits matured and claimed but remains unpaid by company, the company has to pay a penal rate
of interest at the rate 18% for the overdue period.
18) Right to alter the Terms and Conditions : A company cannot either directly or indirectly alter the terms
and conditions of the deposit, Deposit Trust Deed and Deposit Insurance contract, once the circular or advertisement
is issued and deposits are accepted by the company.
19) Disclosure in financial statements : A company has to disclose in its financial statement, by way of
notes, the money received from Directors (or relatives of Directors, in case of a private company).
20) Punishment : As per the Companies Act, an officer of the company who is in default for contravention of
the provisions of the Act is punishable for fraud.
The Maharashtra Government has passed the Maharashtra protection of Interest of Depositors (in Financial
establishments) Act, 1999 to protect the interest of depositors. Companies in Maharashtra will be punished for
contravening the provisions of this Act also.

III) Explain the procedure for accepting deposits from public.

Ans. PROCEDURE FOR ACCEPTING DEPOSITS FROM PUBLIC
Only eligible Public companies can accept deposits from public. Following is the procedure to be followed for
accepting deposits from the public :

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 66 - STANDARD 12TH
1) Hold Board Meeting : Board meeting is held to pass a resolution to accept deposits from public. The
details of amount of deposit, terms and conditions of issue, etc. are decided in this meeting. Also the date and time to
hold a general meeting of the shareholders to get their approval for collecting deposits is decided in this Board
Meeting.
2) Hold a General Meeting : Company holds a General Meeting of the shareholders to seek their
approval for accepting deposits. A Special resolution is passed and it has to be filed with the Registrar of Companies
and if needed with RBI also.
3) Hold Board Meeting : Board meeting is held to approve the draft advertisement. All necessary information as
needed under the Act should be included in the advertisement. The draft should be signed by majority of Directors of
the company.
4) Appoint Banker : Company has to appoint a banker where the applicants will be submitting their
application form along with deposit money.
5) Obtain Credit Rating : Company has to obtain a credit rating from a recognized Credit Rating Agency.
This rating should be mentioned in the advertisement.
6) Appoint Deposit Trustee : Company has to appoint one or more Deposit Trustees. The Deposit Trust
deed contains the terms and conditions agreed upon or between the company and the Trustee. The deed has to be
signed at least 7 days before issuing the advertisement.
7) Take Deposit Insurance : Company enters into an agreement with the Insurance Company for taking
Deposit Insurance. The agreement should be signed at least 30 days before issuing the advertisement.
8) File a copy of advertisement with Registrar of companies : A copy of the advertisement has to be filed
with the Registrar of Companies. 30 days after filing it with the Registrar the company can publish the advertisement.
9) Advertisement to the public : Company has to issue the advertisement after 30 days of filling it with the
Registrar of Companies. The advertisement has to be published in one English newspaper and one vernacular
newspaper having wide circulation in the state where the company’s registered office is located.
10) Upload the advertisement on the company’s website : After releasing the advertisement to the public,
it has to be uploaded on the company’s website.
11) Collect application form and money : Company informs the banker to collect the application forms along
with the deposit money.
12) Issue Deposit Receipt : Company has to issue Deposit Receipt within 21 days from the date of receipt of
money or realization of cheque.
13) Create charge on assets : Company issuing secured deposits has to create a charge on its assets within 30
days of acceptance of deposit.
14) Make entries in Register of Deposits : Within seven days from the date of issue of Deposit Receipts,
Secretary has to enter the details of deposits collected in the Register of Deposits. The entries have to be verified by
authorized officer.
15) File Return of Deposits with Registrar of Companies : Company has to file a Return on Deposit before
30th June every year. The return has details of Deposits with company as on 31st March.

IV) Explain the procedure for accepting deposits from members.

Ans. PROCEDURE FOR ACCEPTING DEPOSITS FROM MEMBERS :
The following is the procedure to accept deposits from members
1) Hold Board Meeting : Secretary arranges for a Board Meeting. In the Board Meeting decision regarding
amount of deposit, terms of issue of deposit, etc. and date to hold a general meeting to seek shareholders’ approval is
decided.
2) Hold a General Meeting : To seek the approval of share holders for accepting deposits, company holds a
general meeting of share holders. The special resolution passed is to be filed with the Registrar of Companies.
3) Hold Board Meeting : After getting share holders’ approval, a Board meeting is held to approve the
draft of circular for inviting applications for deposits from members. The draft should be signed by majority of the
Directors of the company.
4) Appoint Banker : Company appoints a Banker to collect the application forms and the deposit money.
5) Obtain Credit Rating : Company approaches a credit rating agency to rate it’s deposit. The rating given by the
Agency must be mentioned in the circular.
6) Appoint Deposit Trustee : Company appoints Deposit Trustees. The Trust deed is signed at least 7 days
before issuing the circular.
7) Take Deposit Insurance : Company takes Deposit Insurance at least 30 days before issuing the circular.
8) File a copy with Registrar of Companies : A copy of the circular is filed with the Registrar of Companies.
After 30 days of filing, the company can issue the circular.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 67 - STANDARD 12TH
9) Issue circular to members : Company has to send the circulars to members after 30 days of filing it
with Registrar. It is sent by registered post, speed post or email. Company may even publish the circular in
newspapers.
10) Upload circular on company’s website : An eligible public company has to upload the circular on
company’s website. Whereas, it is optional for a private company and other public companies.
11) Collect application form and money : Company informs the bank to collect the application form along
with the deposit money.
12) Issue of Deposit Receipt : Company has to issue Deposit Receipt within 21 days from the date of receipt of
the money or realisation of cheque.
13) Create charge on assets : If a company accepts secured deposits, it has to create a charge on its assets
within 30 days of acceptance of deposits
14) Make entries in Register of Deposits : Within 7 days from the date of issues of Deposit Receipt secretary
has to enter the details of deposits collected in the Register of Depositors. It has to be signed by an authorised officer.
15) File Return of Deposits : Company has to file a Return of Deposit before 30th June every year. The
Return has details of Deposits with the company as on 31st March.

Q.2 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) State the amount of deposits that different types of companies can collect by way of deposits?
Ans. Refer to Q. 1(1) No Chart Should be included.

II) Explain the provisions related to circular or advertisement for inviting deposits?
Ans. Circular or Advertisement : If a company invites deposits from its members, it issues a circular. But if it
invites deposits from the public, company has to issue an advertisement.
a) Contents of circular or advertisement :
i) Statement about the financial position of the company
ii) The portion of secured and unsecured deposit of fresh issue
iii) Credit rating obtained from a Credit Rating Agency (only for eligible public company)
iv) Details of the scheme
v) Name of Deposit Trustees
vi) Amount due towards deposits of any previous deposits accepted by company
b) Filing of circular or advertisement with Registrar of Companies :
Company has to file a copy of circular or Advertisement signed by all directors with the Registrar of Companies.
c) Issue of circular or Advertisement : Only after 30 days of filing a copy of circular or
Advertisement with the Registrar of Companies, the company can issue the circular or advertisement.
Company can send the circular to the members through registered post, speed post or as email.
For inviting the public, company has to publish the advertisement in one English newspaper and one
vernacular newspaper having wide circulation in the state where the company’s registered office is located.
d) Validity of circular or advertisement : The circular or advertisement is valid for 6 months from the end
of the financial year in which it was issued or the date on which the Annual General Meeting was held, whichever is
earlier.

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) All companies cannot accept deposits from the public

Reasons. a) Accepting deposits from public is an important source of raising funds for a company. B) Company
needs to follow certain terms and conditions while collecting deposits from public. C) Similarly, on other side,
provisions issued by Central Government, Companies Rules 2014 and directives issued by Reserve Bank of India do
not allow companies to accept deposits. D) Banking Company, Non Banking Finance Company, Housing Finance
Company are not allowed to accept the deposits.
Thus, it is rightly said, that all companies cannot accept deposits from public.

*II) There is a limit on restrictions on the amount that a company can collect as Deposits
Reasons. a) There are different types of companies which can accept deposits from public as well as members.
B) Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100
percent of its aggregate of paid up share capital and free reserves. However, certain class of Private Companies
as specified by the Companies Act, can accept deposits more than 100 percent of its aggregate of paid up share capital
and free reserves. C) Eligible Public Companies cannot accept fresh deposit from members if the amount of such
deposits together with the previous deposits exceeds 25% of the aggregate of the paid up share capital and free
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 68 - STANDARD 12TH
reserves of the company d) Government Company can accept deposits from public not exceeding (UPTO)
35% of the paid up share capital and free reserves of the company.
Thus, we can conclude that there is a limit or restriction on the amount that a company can collect as Deposits
and the statement stands justitied

*III) company has to fulfill certain provisions related to issue of circular or advertisement.
Reasons. a) Company has to file a copy of circular or Advertisement signed by all directors with the Registrar of
Companies. B) Only after 30 days of filing a copy of circular or Advertisement with the Registrar of
Companies, the company can issue the circular or advertisement. c) It should be signed by all directors of the
company D) Company can send the circular to the members through registered post, speed post or as email.
So, it is rightly said that, company has to fulfill certain provisions related to issue of circular or advertisement.

*IV) While issuing secured deposits, company has to appoint Deposit Trustee.
Reasons. a) When issuing secured deposits, eligible companies and public companies have to appoint one or more
Deposit Trustees. B) The Trustees protect the interest of the depositor in case a company defaults in repaying the
depositors. Company signs a contract with the Deposit Trustees called as Trust Deed. C) It contains the terms and
conditions of the contract. The deed has to be signed at least 7 days before issuing the circular or advertisement.
d) The Deposit Trustee on its own or on the request of one tenth of depositors, can call a meeting of all
depositors when a company defaults in repaying deposits.
Thus, while issuing secured deposits, company has to appoint Deposit Trustee.

*V) Companies have to create a charge on their tangible assets while issuing secured deposits.
Reasons. a) A Company accepting secured deposit from public, within thirty days of acceptance, has to create a
charge on its tangible assets for an amount not less than the amount of deposit accepted. B) The chargeable
asset amount should not be less than the amount of deposit accepted. C) the minimum amount of security should
be equal to the amount not covered by Deposit Insurance. D) The security is created in favour of the Deposit
Trustees. E) Creating a charge on the assets ensures safety to the deposits of a deposit holders. F) In case a
company fails to repay the amount of deposits, the deposit holders can sell the assets and recover their amount
invested.
Thus, companies have to create a charge on their tangible assets while issuing secured depsoits.

*VI) Companies Issuing deposit must open Deposit Repayment Reserve Account
Reasons. a) Every company accepting deposits, has to open in a scheduled Bank, a Deposit Repayment Reserve
Account b) These banks satisfy certain criteria laid by RBI and enjoy certain facilities of RBI c) Every
year, on or before 30 April, company has to deposit an amount not less than 15% of the amount of deposit maturing
during the current year and following financial year. D) This account can be used only for repaying deposit.
Company issuing deposit must open Deposit Repayment Reserve Account.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Which type of companies can collect deposits from members and from public?
Ans. Refer to Q. 1(1)

*II) State any 4 terms and conditions regarding acceptance of Deposit?

Ans. Refer to Q. 1(2)
*III) Explain the provisions related to period/tenure of deposits?
Ans. a) No deposit can be accepted or renewed which is to be repaid within a period of six months or more than
thirty six months. B) In certain circumstances, a company may accept deposits repayable earlier than six months
to meet its short term needs. C) Such deposits must have a tenure of minimum three months and the amount of
such deposits cannot be more than 10% of aggregate of the paid up share capital and free reserves of the company. D)
Under certain circumstances, on the request of the depositor, company makes premature repayment of deposits.
Company may also renew its deposits with the same terms of issue and it will be considered as fresh deposits

*IV) State the contents of Circular or Advertisement for Deposit?

Ans. a) a company invites deposits from its members, it issues a circular. But if it invites deposits from the public,
company has to issue an advertisement.
a) Contents of circular or advertisement :
i) Statement about the financial position of the company
ii) The portion of secured and unsecured deposit of fresh issue
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 69 - STANDARD 12TH
iii) Credit rating obtained from a Credit Rating Agency (only for eligible public company)
iv) Details of the scheme
v) Name of Deposit Trustees
vi) Amount due towards deposits of any previous deposits accepted by company

*V) State the provisions regarding appointment of Debenture Trustee?

Ans. a) When issuing secured deposits, eligible companies and public companies have to appoint one or more Deposit
Trustees. B) The Trustees protect the interest of the depositor in case a company defaults in repaying the
depositors. C) Company signs a contract with the Deposit Trustees called as Trust Deed. It contains the terms and
conditions of the contract. D) The deed has to be signed at least 7 days before issuing the circular or
advertisement. e) The Deposit Trustee on its own or on the request of one tenth of depositors, can call a
meeting of all depositors when a company defaults in repaying deposits.

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*1) Apple Company Ltd. plans to raise funds through Public Deposits. It’s net worth is Rs. 10 Crores.
I) Can they accept deposits from the public ?
Ans. No, the company cannot accept deposits form the public as its net worth is less than Rs. 100 crores
II) Can they accept deposits which matures after 4 years.
Ans. No, deposit can be accepted or renewed which mature after four years.
III) Within what period should the company issue deposit Receipt to it’s depositors ?
Ans. Company has to issue Deposit Receipt to the depositors within twenty one (21) days from date of receipt of
money or realization of cheque.

II) ABC Company Ltd. is an eligible Public Company as per the Companies Act, 2013 with reference to
accepting Public Deposits.
I) Can the company accept deposits in joint names ?
Ans. Yes, company can accept deposits in joint names of depositors. But there should not be more than 3 names.
II) Can the company accept deposits from it’s members ?
Ans. Yes, the company can accept fresh deposits only if the amount of such deposits together with the previous
depsoits does not exceeds 10% of aggregate of paid up share capital and free reserve.
III) Can the company issue secured deposits ?
Ans. Yes, the company can issue secured deposit only if it is clearly which should be clearly mentioned in the circular
or advertisement inviting deposits.

III) Apple Company Ltd. is an eligible Public Company. It plans to raise secured deposits from the public.
Please advice its Board on the following.
I) Does the company need to get shareholders approval for accepting deposits ?
Ans. Yes, the company has to seek the shareholders approval for accepting deposits by passing a special resolution.
II) Does the company have to appoint a Debenture Trustee ?
Ans. Yes, the company has to appoint Deposit Trustee as it is issuing secured deposits
III) Within what period should the company create a charge on it’s assets ?
Ans. A company can create a charge on its tangible assets within 30 days of acceptance.

*IV) SUN Pvt. Ltd. company wants to raise funds through deposits.
I)Can the company accept deposits from the public ?
Ans. No, it cannot accept deposits from the public because it is a private company
II) Which document should the company issue to invite deposits ?
Ans. A private limited company can issue circular to invite deposits
III) What is the maximum period for which they can accept deposits ?
Ans. The maximum period for accepting deposits is 36 months.

Q.6 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Eligible Public company

Ans. These companies can accept deposits from their members and also from the public. Eligible public company
means a company having :
a) A Net worth of not less than Rs 100 crores or,
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 70 - STANDARD 12TH
b) Turnover of not less than Rs. 500 crores and which has obtained prior approval of its shareholders through special
resolution for accepting public deposits.

*II) Tenure of Deposit

Ans. a) Tenure of deposit, is the term or period of deposit. B) A company can accept deposits for a period of six
months or more than thirty six months. C) In certain circumstances, a company may accept deposits repayable
earlier than six months to meet its short term needs. D) Premature repayment is made after 3 months

*III) Secured Deposit

Ans. a) Secured deposits are those deposits against which a charge is created within 30 days of the issue. B) A
company can accept secured or unsecured deposit which should be clearly mentioned in the circular or advertisement
inviting deposits.

*IV) Deposit Trustee

Ans. a) Deposit trustee acts as a link between the company and deposit holder b) Eligible companies and public
companies issuing secured deposits appoint one or more Deposit Trustees. C) The Trustees protect the interest of
the depositor in case a company defaults in repaying the depositors

*V) Charge on Tangible Asset

Ans. a) A company accepting secured deposit from public, within 30 days of acceptance, has to create a charge on its
tangible assets for an amount not less than the amount of deposit accepted. B) it means keeping tangible assets as
security for the secured deposit hold.

*VI) Deposit Insurance

Ans. a) Deposit Insurance is a protection cover for deposit holders b) It is to be taken at least 30 days before issue
of circular or advertisement. c) if the amount of deposit plus interest on it is upto rs. 20,000/- then insurance is to
be taken

*VII) Deposit Repayment Reserve account

Ans. a) DRRA is an account opened in a scheduled Bank for repaying the deposit amount. Every company has to
open DRRA who accept deposits. B) every year, on or before 30 April company has to deposit an amount not
less than 15% of the amount of deposits maturing during the current year and following financial year.

*VIII) Credit Rating

Ans. a) Credit Rating is an estimate of the ability of the organization to fulfill their financial commitments. B)
Every company has to get credit rating of its deposits through Credit Rating Agency. C) The Credit rating Agency
considers the net worth of the company, liquidation position, ability to repay deposits on time etc. and accordingly
gives a rating. D) Rating shall be obtained every year during the tenure of the deposits.

*IX) Deposit Receipt

Ans. a) |Deposit Receipt is issued by the company to depositors. B) Deposit receipt is issued within twenty one (21)
days from the date of receipt of money or realization of cheque. C) The receipt has to signed by the officer duly
authorized by the Board of Directors. D) The Receipt contains the name and address of the Depositor, amount of
deposit, Rate of Interest payable and date on which it is repayable.

*X) Return of Deposit

Ans. A) A company has to file a Return of Deposit, on or before 30 June every year, with the Registrar of Companies.
B) The Return Gives details of deposit with the company as on 31st March of that year.

XI) Register of Deposit

Ans. A)Register of Deposits records all the deposits accepted or renewed by the company at its registered office.
B) The details of the deposits along with the details of the depositors should be entered in the Register of Deposits
within 7 days from the date of issue of Deposit Receipt

XII) Interest on Deposit

Ans. A) The return received on deposit amount is called Interest on Deposit B) The rate of interest on deposits is
decided by Reserve Bank of India from time to time. C) in case of premature repayment of deposits, company can
deduct 1% interest from the rate of interest stated at the time of acceptance of deposit

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 71 - STANDARD 12TH
Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1) Deposit is a type of ................................................. .
a) Owned capital b) Short term loan c) Long term loan
*2) Eligible public company and Government Company can collect deposits from .........................
a) It’s employees b) Public c) RBI
*3) Private company can accept deposits from its member or Directors upto not more than................... % of its
aggregate of paid-up share Capital and free reserves.
a) 100 b) 35 c) 25
*4) A ......................................... Company can accept deposits from public not exceeding 35% of its paid-up share
Capital and free reserves.
a) Government b) Private c) Eligible Public
*5) Deposit can be accepted for a minimum of 6 months and maximum for………………months.
a) 36 b) 3 c) 30
*6) Company issues ........................................... to invite its members to subscribe for its deposit scheme.
a) Advertisement b) Circular c) Newspaper
*7) Company can issue circular or advertisement for inviting deposits after ............. days of filing it with Registrar of
Companies.
a) 30 b) 21 c) 7
*8) Company has to appoint ..................................... to protect the interest of depositors.
a) Debenture Trustees b) Deposit Trustees c) Credit Rating Agency
*9) Charge on assets is to be created when a company issues ........................
a) Unsecured deposit b) Unsecured Debenture c) Secured deposit
*10) Deposit Receipt is issued within ............. days of receipt of deposit.
a) 7 b) 30 c) 21
*11) For premature repayment of deposit, company deducts ........................ % of interest.
a)1 b) 18 c) 20
*12) Return of deposit must be filed every year on or before ........................
a) 30th June b) 31st March c) 30th April
13) No deposits can be repaid before………….months
a) one b) six c) nine
14) Premature Deposits can be repaid after…………months
a) two b) three c) Four
15) ……………company cannot collect deposits from the public.
a) Private b) Public c) Government
16) A copy of return of deposits must be sent to ……………
a) Registrar of Companies b) Government of India c) State Bank of India
17) On acceptance of deposits, companies required to keep register of deposits at…………
a) Office of the Registrar b) SEBI office c) Registered office of the company

Q.8 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Private company a) 10% of aggregate of paid up share capital + Free Reserve
2) Deposit Trust Deed b) Signed at least 7 days before issuing advertisement
3) Secured Deposit c) Maximum 30 months
4) Tenure of deposit d) Charge on tangible assets
5) Return o f Deposit e) 100% aggregate of paid up share capital +free reserve
f) File on or before 31st March every year
g) Signed 21 days after issuing advertisement
h) Maximum 36 months
i) Charge on intangible assets
j) File on or before 30 June every year
Ans. (1-e),(2-b),(3-d),(4-h),(5-j)

*2) A GROUP B GROUP

1) Return of Deposit a) Cognizable criminal offence
2) Deposits in contravention of law b) 25% of paid up capital
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 72 - STANDARD 12TH
3) Deposit Repayment Reserve account c) Delivered to the Registrar of companies
4) Registrar of companies d) Approved by the SEBI
5) Eligible Public companies e) filing of circular or advertisement.
f) On or before 30 June every year
g) Not less than 15%
h) Net worth 100 crore
i) Net worth 10 crore
j) No punishment
Ans. (1-f),(2-a),(3-g),(4-e),(5-h)

*3) A GROUP B GROUP

1) Private company a) Approval of secretary
2) Period of Deposit b) Can accept deposits from public
3) validity of advertisement c) Can accept deposits from its members or relatives of
Directors or Directors
4) Board of Directors d) Six months to three years
5) Public company e) Approval of deposits.
f) Right to accept deposits
g) Six months to forty two months
h) Refund of deposit before maturity
i) Ten months after the expiry of financial year
j) Six months after the expiry of financial year.
Ans. (1-c),(2-d),(3-j),(4-f),(5-b)

Q.9 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1) A company which can accept deposits from its members, directors or their relatives not exceeding 100% of
aggregate of paid up share capital and free reserves.
*2) Company which can accept deposits from public up to 35% of its paid-up share capital and free reserves.
*3) Minimum tenure of a deposit.
*4) Maximum tenure of a deposit.
*5) Period within which a company has to create a charge on its tangible assets.
*6) Document issued by a company to invite its members to subscribe for its Deposits.
*7) Agreement between company and Deposit Trustee.
*8) Account that can be used only for repaying deposits.
*9) Time within which company has to issue deposit Receipt.
*10) Book which contains details of deposits accepted or renewed.
11) An acknowledgement of deposit accepted by the company
12) Type of company that can accept deposits from members as well as public
13) a record of details of public deposits maintained by the company
14) The authority which has the power to accept deposits
15) Return on investments as deposits in the company
16) Time within which company has to issue deposit receipts
ANS. 1) Private Company 2) Government Company 3) 6 months 4) 36 months 5) 36 days
of acceptance 6) Circular 7) Deposit Trust Deed 8) Deposit Repayment Reserve Account 9) 21
days 10) Register of Deposits 11) Deposit Receipt 12) Eligible Public Company 13) Deposit
register 14) Board of Directors 15) Interest 16) 30 Days.

Q.10 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Debenture holders have no voting rights.
*2) Company cannot issue non-convertible debentures.
*3) Special Resolution is needed to issue convertible debentures.
*4) Debentures holders are paid interest.
*5) Debenture Trustees can not approach NCLT to redress grievances of debenture holders..
*6) All secured debentures should be redeemed within 20 years from date of its issue.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 73 - STANDARD 12TH
*7) Company has to create a charge on its assets when it issues secured debentures.
*8) Debenture trustees are appointed to protect the interest of shareholders.
*9) Debenture certificate is issued within 6 six months of allotment of debentures.
*10) After allotment of Debentures their names are entered in the register of members.
11) A company can accept deposits payable on demand
12) A company can accept deposits to any extent
13) Acceptance of deposits is same as renewal
14) Deposits may be secured or unsecured.

ANS.
TRUE : 2, 5, 7, 8, 10, 14,
FALSE : 1, 3, 4, 6, 9, 11, 12, 13,

Q.11 FIND THE ODD ONE (ONE MARKS EACH)

*1) Private company, Eligible public company, Government company.
*2) Deposit Trustee, Deposit Trust Deed, Special Resolution.
*3) Appointment of Deposit Trustee, Appointment of Registrar of companies, Appointment of Credit Rating
Agency.
4) Record of Deposits, Registered office of the companies, Registrar of companies
5) Six months, thirty six months, forty two months
6) Advertisements, Circular, Board Meeting
7) English Newspaper, Application form, Regional Newspaper
8) Return of Deposits, stock exchange, registrar of companies

Q.12 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Deposit is a type of .......................... term loan.
*2) Eligible Public company and Govt. Company can accept deposits from .......................... .
*3) To collect deposits from public, Eligible public company must have a net worth of not less than
Rs .......................... .
*4) A Government company can accept deposits from public not exceeding .......................... .
*5) Deposits can be accepted or renewed for a period not less than 6 months and not more than .......................... .
*6) Company cannot accept or renew deposits repayable on .......................... .
*7) Premature repayment of deposits can be done by a company but not before .........................
*8) To invite the public to subscribe for its deposits, a company issues .......................... .
*9) Agency which gives ratings of the deposits of a company is called .......................... .
*10) Account which is used only for repaying deposits is called .......................... .

ANS. 1) Short term loan 2) Public 3) Rs. 100 crores 4) 35% of the paid up share capital and free
reserves of the company 5) 35 months 6) Demand 7) 3 months 8) Advertisement 9) Credit
Rating Agency 10) Deposit Repayment Reserve account

Q.13 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Government Company a) …………..
2) ………………. b) Deposits from members
3) 36 months c) ………….
4) ……………… d) Charge on tangible Assets
5) Return of Deposit e) ……………
(File on or before 30th June, Private Company, Secured deposits, Deposits from public, Maximum tenure of deposits.)

ANS 1) Deposits from Public 2) Private Company 3) Maximum tenure of Deposits 4) Secured
Deposits 5) File on or before 30 June.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 74 - STANDARD 12TH
Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)
*1) Which companies can accept deposits from public ?
Ans. Government Companies and Eligible Public companies can accept deposits from public
*2) What is the maximum deposit the Government company can collect ?
Ans. Government Company can accept deposits from public not exceeding 35% of the paid up share capital and free
reserve of the company
*3) What is the tenure of a deposit ?
Ans. A company can accept deposit for minimum 6 months to maximum 36 months
*4) Who are Deposit Trustees ?
Ans. Eligible companies and public companies have to appoint one or more Deposit Trustees to protect the interest of
the depositors, in case a company defaults in repaying the depositors.
*5) What is Deposit Trust Deed?
Ans. Company sings a contract with the Deposit Trustees called as Trust Deed which contains the terms and
conditions of the contract
*6) When does a company create charge on its tangible assets ?
Ans. A company accepting secured deposit from public has to create a charge on its tangible assets.
*7) Within what period should a company issue Deposit Receipt ?
Ans. Company has to issue Deposit Receipt to the depositors within twenty one (21) days from date of receipt of
money or realization of cheque.
*8) When should a company file Return of Deposit ?
Ans. A company has to file a Return of Deposit on or before 30 June every year with the Registrar of Companies.
*9) What is Deposit Repayment Reserve Account ?
Ans. Every company accepting deposits, has to open a Deposit Repayment Reserve Account in a schedule bank which
can be used only for repaying deposit
*10) What is Register of Deposit?
Ans. A company has to maintain a separate Register for deposits accepted or renewed at its registered office which is
called Register of Deposits
11) Are loans and deposits the same?
ANS. Loans means any sum borrowed by a company. It has to be repaid instantly or when demanded by the lender
whereas deposits are sum borrowed by company but repaid only on fixed maturity date.

Q.15 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) Government Company can accept deposit from members.
Ans. Public
*2) Company issues advertisement to invite its members for subscribing to its deposits.
Ans. circular
*3) Company appoints Credit Rating Agency to protect the interest of Depositors.
Ans. Deposit Trustee
*4) Deposit Receipt is issued within seven days from date of receipt of deposits.
Ans. 21 days
*5) Register of deposits is to be filed with the Registrar of companies on or before 30th June every year.
Ans. Return of Deposit
*6) Charge on assets is created when company issues unsecured deposit.
Ans. Secured
*7) Minimum tenure of deposit is 36 months.
Ans. 6 Months

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) a. Appoint Deposit Trustee, Hold General Meeting. Create charge on assets.
Ans. Hold General Meeting, Appoint Deposit Trustee, Create charge on Asset
*2) File Return of deposit , Issue Deposit Receipt , Issue advertisement.
Ans. Issue Advertisement, Issue of Deposit Receipt, File return of Deposit
*3) Obtain Credit Rating. , Entries in Register of Deposits., Issue Deposit Receipt.
Ans. Obtain Credit Rating, Issue Deposit Receipt, Entries in Register of Deposits

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 75 - STANDARD 12TH
CHAPTER 6. CORRESPONDENCE WITH MEMBERS

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Which precautions are to be taken by the Secretary while corresponding with members?
Ans. PRECAUTIONS TO BE TAKEN BY THE SECRETARY WHILE CORRESPONDING WITH
MEMBERS
The Company Secretary has to correspond with Members on various occasions. While writing various letters,
the Secretary should give due respect to the Members, provide complete and correct information.
Thus, writing letters to the Members is a challenging task and it requires skills, knowledge and techniques.
1) Correct Information : The Secretary should always provide correct, up-to date and factual information to
the Members. Due care should be taken while giving facts and figures.
2) Lucid Language : The Secretary must use simple words, simple sentences and adopt realistic style while
writing letters to the Members. Technical words, long sentences should be avoided in the letter. It should be easy to
understand.
3) Prompt Response : The Secretary must be prompt in sending replies to the letters received from the
Members. Any questions or queries raised by the members must be promptly replied by the Secretary. Complaint
letters should be promptly attended to without any delay.
4) Secrecy : The Secretary should not disclose any confidential information of the company to the Members.
The Secretary should tactfully answer some letters without giving any secret information of the company.
5) Politeness (Courtesy) : A courteous letter shows sympathy, respect and mutual understanding. Politeness
means use of courteous language. A complaint letter should be replied politely. Rude language should be strictly
avoided while corresponding with Members.
6) Legal matters : The Secretary should compulsorily follow relevant provisions of the Companies Act, 2013
with latest amendments and other relevant laws while corresponding with Members. While drafting these letters, if
necessary Secretary should consult with legal advisor on certain matters.
7) Consideration : The writerCOMFORT
should due the MOTORS LTD
importance and consideration to the reader and consider the
problems of the member. While sending negative replies, he should Road,
Registered Office – A/30, Arora Towers, M. G. draft Camp,
these letters more carefully, so that
Pune – 400056.
Members should not be hurt. Secretary should make the member feel that the management honestly regrets refusal.
8) Image of the Company : The Secretary should try to project good image of the company in every situation.
Telephone:
While drafting 26266234 Website
the letters, Secretary has to try his best to remove their : www.comfortmotors.com
doubts, queries and difficulties in a polite and
Fax No:manner.
courteous 26266235 Email: comfort@gmail.com
Ref. No: MEMBER/125/09 Date: 12th November, 2019.
*2) Write a letter to the members for the issue of Share certificate
Ans.Mr. Jayant Modi,
*3)Abhiman Apartment,
Write a letter to the member for the payment of dividend through Dividend warrant
30, L. B. Road,
*4)Pune416004 . to the member for the payment of Interim Dividend electronically
Write a letter

Sub : Issue
*5) Write a letter to the shareholder regarding of Share
issue Certificate.
of Bonus Shares
Dear Sir,
*6) Draft aThis is toletter
replay inform you thatthe
resolving as query
per your
of Request Application
the member on low No.
rate50, I am hereby authorised to issue
of dividend.
you a Share Certificate. The said Share Certificate will be delivered to you within 15 days from the date
of this letter by registered post to your registered address as mentioned in the Register of Members.
Details of issue of Share Certificate are as follows:
1 2 3 4
Folio No. Share Distinctive Numbers Total Number of Shares
Certificate
*2)Answer Numbers
From To
1006 9630 301 400 100
It shall always be our endeavour to provide best of our services to you at all time.
Thanking you,
Yours faithfully,
For Comfort Motors
Ltd.

Sign
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791) Mr. Anand Swami
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Company Secretary
SECRETARIAL PRACTICE - 76 - STANDARD 12TH

ANMOL STEEL INDUSTRIES LIMITED

Registered Office : 30, Anmol Niwas, J. M. Road,
Nariman Point, Mumbai - 400 020.
CIN : L30408 MH 2003 PLC110845

Phone : 022-97675877 Website : www.anmolindustries.com

Fax No: 022-26266235 Email: anmol@gmail.com
Ref. No: MEMBER/125/09 Date: 7th May, 2019.

Mrs. Jyoti Surti,

12, Laxmi Niwas,
Amrapali Marg, Bandra,
Mumbai - 400 050..

Sub. : Payment of Dividend on Equity Shares

(Equity Shares of Rs 10 each at par)

Dear Madam,
I am instructed by the Board of Directors to convey to you that in the 31st Annual General
Meeting held on 20th April, 2019, Final Dividend @ Rs 2.5 per equity share of Rs. 10/- each has
been approved by the members for the year ending 31st March, 2019.
Your company has complied with all the statutory provisions (Sec. 123 of the Companies Act.
2013) relating to declaration of dividend
Details of dividend payable to you are as follows :
1 2 3 4 5 6 7
Register No. of Distinctive Nos. Dividend Gross Income Net
Folio No. Share Warrant Dividend Tax Dividend
held No. Deducted
(TDS)
*3) ANSWER From To
A-30 100 301 400 B-9931 Rs. NIL Rs. 250/-
250/-

The ‘Dividend Warrant’ is attached herewith. Please detach the ‘Dividend Warrant’ along the
perforated line.
Thanking you,
Yours faithfully,
For Anmol Steel Industries Limited.

Sign
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
Secretary
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Encl. : Dividend Warrant
SECRETARIAL PRACTICE - 77 - STANDARD 12TH

GURUSAI AUTO LIMITED

Registered Office : 30, Anmol Niwas, J. M. Road,
Nariman Point, Mumbai - 400 020.
CIN : L30408 MH 2003 PLC110845

Phone : 022-97675877 Website : www.gurusailimited.com

Fax No: 022-26266235 Email: anmol@gmail.com
Ref. No: MEMBER/125/09 Date: 3Rd June, 2019.

Mr. Jayant Modi

15, Sagar Apartment,
Van Vihar Road,
Pune - 411 030.

Sub. : Payment of Interim Dividend through Electronic Clearing Service (ECS), Direct Credit /
NEFT

Dear Sir,
We are pleased to inform you that the Board of Directors of Gurusai Auto Limited in its meeting
held on Thursday, 28th May 2019 has declared Interim Dividend @ Re. 1/- (i.e. 10%) per equity share of face
3) 10/- each.
value of Rs.
As per the instructions given by you (either in person or through Depository Participant), we have remitted
the amount of aforesaid Interim Dividend to your Banker for crediting your Bank Account, i.e. Dividend will be
payable by electronic transfer. Your company has complied with all the provisions relating to declaration and
payment of dividend.
Details of Dividend payable to you are given below:
1 2 3 4 5 6
No. of equity Shares held on Dividend Dividend DPID and Date of Bank A/c.
Record Date (May 31st, 2019) Per Share Amount Client ID No. Remittance (BOB)
(Rs.) (Rs.)
5656000
*4) Answer 12033 6th June, 22105
50 1 500 200074 2019
0 Bank of
79005
Baroda
Please verify the credit of amount in your Pass Book / Statement of accounts.
As per the provisions of the Income Tax Act, 1961 no tax is required to be deducted at source in respect
of Dividend payment, but dividend Distribution Tax has been paid by the Company.
Thanking you,

Yours faithfully,
For Gurusai Auto Limited

Sign
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
(Mr. Jitesh M. Gandhi)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE),
CompanyB.S.P.)
Secretary
SECRETARIAL PRACTICE - 78 - STANDARD 12TH

YASH INDUSTRIES LIMITED

Registered Office : 102, New MIDC, Usha Tower, Shahu Chowk,
Mumbai - 400 031.
CIN : L50307 MH 2000 PLC160699
Phone : 022-97675877 Website : www.yashindustries.com
Fax No: 022-26266235 Email: anmol@gmail.com
Ref. No: MEMBER/125/09 Date: 16th October, 2019.

Ms. Yukta Shroff

715, Narayan Peth, Laxmi Road,
Pune - 411 038
Sub. : Issue of Bonus Shares
Dear Madam,
I am directed by the Board of Directors to inform you that in accordance with the resolution
passed in the Extra-ordinary General Meeting of the company held on 14th October, 2019 Shareholders
have unanimously approved the recommendation of Board of Directors to issue Bonus Shares. Bonus
Shares are issued in the ratio of 1:1, i.e. one additional equity share for every equity share held as on
record date 13th October, 2019.
The Details of issue of Bonus Shares are as follows :
*5) ANSWER
1 2 3 4 5
No. of Shares held No. of Bonus D.P. ID No. Client ID No. Date of Credit to
on record Shares Issued / Demat
date Allotted A/c
Credited to Demat Account No.
25 25 IN 300100 10116061 31-10-2019
The Company has complied with the provisions for the issue of Bonus Shares.
The Bonus Shares issued will rank pari passu with the existing equity shares.
Thanking you,

Yours faithfully,
For Yash Industries Limited

Sign
(Mr. S. R. Naik)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE),Company
B.S.P.) Secretary
SECRETARIAL PRACTICE - 79 - STANDARD 12TH

SHREE CEMENT INDUSTRIES LIMITED

Registered Office : 31, Tulsi Tower, Bandra (East),
Mumbai - 400 050
CIN : L30408 MH 2003 PLC110845

Phone : 022-97675877 Website : www.shreeindustries.com

Fax No: 022-26266235 Email: anmol@gmail.com
Ref. No: MEMBER/125/09 Date: 20th April, 2019.

Ms. Kishor Malpani,

15/21, Lotus Apt., Borivali (W),
Mumbai - 400 103.

Sub. : Resolving Query on Low Rate of Dividend made by the Company

Dear Sir,
This is to inform you that as per your letter dated 15th April, 2019 I am hereby authorised to resolve your
query regarding the low rate of dividend paid by the company to their faithful members. The reasons for low rate
of dividend are mentioned below :
6) ANSWER
1) That during the last year, due to the floods, company’s factory situated at Mahim (E) was not in a
condition to operate in a full fledge manner.
2) That due to such unavoidable circumstances of natural disaster company faced huge financial losses.
3)That due to such circumstances Board of Directors has decided to transfer Rupees 12.5 crores to
General Reserves which is 50% more than the amount transferred to Reserves last year.
Hope you will be satisfied by the above information as provided by the company. We assure you that
company will easily come over from such unavoidable circumstances and will deliver much better dividend in
the coming years.
Thanking you,

Yours faithfully,
For Shree Cement Industries
Limited

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791) Sign
(Mr. Suhas Bajaj)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Company Secretary
SECRETARIAL PRACTICE - 80 - STANDARD 12TH

Q.2 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) The Company Secretary should take certain precautions while corresponding with members
Reasons. a) The secretary has to communication the decisions of the management and other information to the
members through correspondence. He should be very cautious and careful while corresponding with the members of
the company. B) The Secretary should always provide correct, up-to date and factual information to the
Members. C) The Secretary must use simple words, simple sentences and adopt realistic style while writing
letters to the Members. D)The Secretary must be prompt in sending replies to the letters received from the
Members. E) A courteous letter shows sympathy, respect and mutual understanding. F) The Secretary
should compulsorily follow relevant provisions of the Companies Act, 2013 with latest amendments and other
relevant laws F) The Secretary should try to project good image of the company in every situation.

*II) There are certain circumstances when a secretary has to correspond with members
Reasons : a) Secretary correspond with members on behalf of the company b) Secretary acts as a link between
the company and its members c) When the shares are allotted to the members they are been informed through the
allotment letter. Similarly, if the application of shares has been rejected then members are been informed by the regret
letter. D) secretary also informs members through letters on various occasions like issue of share certificate,
payment of dividend, issue of bonus shares, reply to the query raised by the member etc.
Thus, it is rightly said that, there are certain circumstances when a secretary has to correspond with member

III) Share certificate is a registered document

Reasons a) Share Certificate is the title to the shares issued by the company b) It is duly stamped and signed
by two directors and countersigned by the directors, under the common seal of the company c) It contains all the
details regarding the issue of shares, shareholders name, number of shares issued, share certificate number etc. d)
it is issued or dispatched to the allottee within two months after allotment of shares.
Thus, share certificate is a registered document

IV) Registered shareholders get dividend through dividend warrant or electronically

Reasons : a) Dividend is the portion of profits of the company which is distributed to the shareholders of the company
b) Dividend can be paid through dividend warrant or by means of electronic mode. Ei.e. E.C.S. or NEFT etc only on
to the registered shareholders c) Dividend is paid through dividend coupon to share warrant holders. Share

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 81 - STANDARD 12TH
warrant is a bearer document of title of shares. D) the letter contains number of equity shares held, dividend
warrant number, gross dividend, TDS if any, net amount of dividend etc.
Thus, it is rightly said that the registered shareholders get dividend through dividend warrant or electronically.

V) Reply letter contains or specifies the reasons for the low rate of dividend.
Reasons : a) Reply letter is the answer given to the questions raised by the member b) The letter is sent to the
concerned member who is not satisfied with the payment of dividend made by the company c) The letter contains
reasons for the lowering down of the rate of dividend d) the secretary has to convince the shareholders that
dividend is lowered due to valid reasons and assure that company will overcome the situation.
So, reply letter contains or specifies the reasons for the low rate of dividend.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Explain, Secretary acts as a link between the Director and its Members
Ans. a) A secretary is the employee of the organization. The secretary is responsible for the compliances with
statutory and regulatory requirements. B) The secretary communicates the decisions and information taken by the
management to the members through correspondence. C) the secretary also deals with the government agencies
and private institutions d) The secretary replies to the queries raised by the members. Complaints letter should be
promptly attended without any delay by the secretary e) The secretary should provide correct and updated
information to the members as and when demanded.

*II) What are the circumstances under which Secretary undertakes correspondence with members.
Ans. The following are the various occasions when the Secretary writer the letter to the members of the company
i) Allotment Letter when shares are issued to the applicant
ii) Letter of Regret when shares are not issued to the applicant for any reason
iii) Letter of issue of Share Certificate to the allotted members\
iv) Letter for Payment of Dividend through Dividend warrant or Electronic Payment of Dividend
v) Letter for issue of Bonus Shares or Rights Issue
VI) Reply letter to the query of the member on lowering rate of dividend
vii) Approval of Transfer of Shares after serving lodgement notice to the transferor as well as the transferee
viii) Refusal of Transfer of shares, if call money is unpaid or any lien
ix) Notice and Agenda of General Meeting.
x) Reply to certain queries raised by the members
xi) Letter to the legal representatives regarding Transmission of shares
xii) Notice of loss of Shares Certificate

III) Write a note on : Payment of Dividend

Ans. a) Dividend is the portion of the profits of the company which is distributed to the Shareholders of the
company. B) Dividend can be paid through Dividend Warrant or in an electronic mode (Electronically by ECS,
NEFT etc.) to the registered Shareholder who is entitled to dividend. C) Dividend is to be declared and
approved by the shareholders at its Annual General Meeting on such a rate as may be recommended by the Board.
D) Dividend is to be paid to the shareholders within 30 days from the date of declaration. E) According to the
instructions given by the Board, the Secretary sends a letter to the concerned shareholder for the payment of dividend.
The letter contains detailed information about the payment of dividend such as - Number of Equity Shares held,
Dividend Warrant Number, Gross Dividend, TDS (if any), Net amount of dividend, Distinctive No. (if any) etc.

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*I) AS s Secretary of Networks Limited

A) Give any 3 occasions where he will have to correspond with members.
Ans. secretary will correspond with members on following occasions.
i) Issue of Share certificate ii) Payment of Dividend iii) Reply to query letter
B) 3 Points of precautions he will take while drafting a letter
Ans. Correct Information, Lucid Language and Image of the Company have to be borne in mind.
C) Whether he should take Directors approval before drafting any letter
Ans. Yes, Directors approval is
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 82 - STANDARD 12TH

II) Comfort Motors Ltd. Has allotted shares to Jayant Modi.

A) Will Comfort Motors Ltd. Send letter to Mr. Jayant Modi?
Ans. Yes, when Mr. Jayant Modi demands, the company will send the letter for issue of share certificate
b) How will the company send the share certificate?
Ans. Company will send the share certificate through registered post
C) What information should the letter of issue of share certificate contain?
Ans. The letter of will contain information such as folio no., share certificate no., no. of shares etc.

III) Mr. Ashish Rai has applied for 100 shares of Rs. 10/- each payable at Rs. 2/- per share on application Rs.
4/- on allotment and Rs, 4/- on 1st and final call
A) Is there any compulsion that he get the number of shares he has applied for?
Ans. No, there is no such compulsion to get the shares he has applied for. In case of oversubscription he may or may
not be allotted shares.
B) What is the amount he will have to pay at the time of application?
Ans. Mr. Ashish will have to pay Rs. 200/- as (Rs. 2 * Rs. 100 shares applied for) at the time of application.
C) What is the maximum amount he will have to pay for the above shares?
Ans. Rs. 1000/- (Rs. 10 * 100 shares) is the maximum amount that Mr. Ashish will have to pay as total amount for the
shares.

IV) Anmol Steel Industries Ltd. Wants to pay dividend to the registered shareholders
A) Who recommends and approves the rate of dividend?
Ans. The Directors recommends and shareholders approve the rate of dividend
B) How will the dividend be paid to the shareholders?
Ans. The dividend can be paid through dividend warrant or through electronic mode i.e. ECS, NEFT etc.
C) Is the letter send to the registered shareholders?
Ans. Yes, the companies sends the letter of payment of dividend

V) Mr. Rajat Sheth seeks information about interim dividend as heard from one of his fellow shareholder\
A) What does the Secretary refer to?
Ans. The secretary will refer to the date of dividend notice sent to the members
B) Does he need to give the details of the interim dividend?
Ans. Yes, he can give the date and details sent.
C) After getting the details does Mr. Rajat have any document that he can refer to as a proof?
Ans. Mr. Rajat can verify with the pass book or statement as regards amount credited.

VI) Yash Industries Ltd. Is issuing Bonus Shares.

A) Can company issues bonus shares to all the shareholders?
Ans. No, the company can issue bonus shares to only existing shareholders of the company
B) Is it necessary for the shareholders to pay certain amount for bonus shares?
Ans No, bonus shares are fully paid up shares given by the company as gift.
C) How are the shareholders informed regarding the issue of bonus shares?
Ans. Bonus shares are credited to shareholder’s Dmat Account or Share certificate is issued if shares are held in
physical form.
VII) Mr. anand Khot has complained of low rate of dividend. As a secretary
A) Is it necessary to reply t the complaint letter?
Ans. Yes, it is a must for the Secretary to send a reply letter.
B) Is it necessary to give reasons for low rate of dividend?
Ans. Yes, reasons as discussed in the AGM can be written in the letter in order to convince about low rate of dividend.
C) Which points he has to keep in mind while drafting the above letter?
Ans. Prompt response, correct information, Politeness and image of the company are some of the major points to be
considered while drafting letter.

Q.5 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

I) Correspondence With Members

Ans. Correspondence with Members means to communicate the decisions and information of the management to the
members through letters. The letter not only includes casual informing but also sending replies to the letters.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 83 - STANDARD 12TH
*II) Capitalisation of Reserve
Ans. Capitalisation of reserves is the use of corporate reserves to pay a bonus to the shareholders in the form of
additional shares. It is distributed to equity shareholders in pre-determined ratio

III) Share certificate

Ans. Share certificate is a registered document. It is a title of shares issued by the company under the common seal of
the company. It should be duly stamped and signed by two directors and countersigned by the secretary of the
company.

*IV) Bonus Shares

Ans. Bonus shares are fully paid up shares given by a company as a gift out of its accumulated profits or reserves to
the existing equity share holders in proportion of shares held by them. It is given free of cost and also known as
capitalisation of reserves.

*V) Dividend Warrant

Ans. Dividend warrant is written order given by the company to its bankers to pay amount mentioned in it to the
shareholder whose name is specified therein. Dividend can be paid through Dividend warrant or by means of
electronic mode ECS or NEFT etc. to those shareholders who are registered members i.e. their names appear in the
Register of members.

Q.6 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) Shareholders are…………….of the company.
a) Owners b) Creditors c) loan givers
*2. Directors are the ..................
a) paid employee of the company b) representatives of the share holders c) creditors of the
company
3) Important decisions need approval of …………..at the meeting
a) Auditors b) Shareholders c) Directors
4) Secretary write letter to the members as………….
a) Auditor b) Public relations Offer c) Director
*5) Secretarial correspondence with members should be ................. .
a) lengthy b) shortcut c) prompt and precise
*6) Share Certificate should be ready for delivery by the company within …………. Months after the allotment
of shares.
a) 3 b) 5 c) 2
*7) Dividend is paid out of ................. of the company.
a) Capital b) Building Fund c) Profit
8) …………shares are issued to existing equity shareholders
a) deferred b) preference c) Bonus
*9) Shares issued free of cost to the shareholders are known as……….. shares.
a) preference b) equity c) bonus
*10) Dividend is recommended by ................. .
a) Board of Directors b) shareholders c) Depositors
*11) Dividend is to be paid to the shareholders within……… days from the date of declaration.
a) 30 b) 40 c) 20
*12) Registered shareholders receive dividend through……… warrant.
a) share b) debenture c) dividend
*13) ................ is issued by the company to its registered shareholders after the declaration of dividend at the Annual
General Meeting of the company.
a) Dividend Warrant b) Interest Warrant c) Share Warrant
14) Polite and prompt correspondence by secretary creates………….of the company.
a) goodwill b) prestige c) image
15) secretary is a …………………..of confidential matter.
a) caretaker b) custodian c) auditor

Q.7 MATCH THE PAIR(ONE MARKS EACH)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 84 - STANDARD 12TH

*1) A GROUP B GROUP

1) Dividend warrant a) Instrument for payment of interest
2) Return on shares b) Capitalisation of Building Fund
3) Bonus Shares c) Electronic Clearance service
4) ECS d) Capitalisation of Reserve Fund
5) NEFT e) National Electronic Fund Transfer
f) Dividend
g) Electronics co-operative society
h) National Electronic Fixed Transfer
i) Instrument for payment of Dividend
j) Interest
Ans. (1-i),(2-f),(3-d),(4-c),(5-e)

2) A GROUP B GROUP
1) Secretary a) Registered Document
2) Electronic mode b) Fluctuating rate of Dividend
3) Share certificate c) Correspondence with members
4) Reply letter d) Dividend warrant
5) Bonus Shares e) Payment of Dividend
f) Existing equity shareholder
g) Bearer Document
h) Low rate of dividend
i) Fluctuations in market
j) Correspondence with Bank
Ans. (1-c),(2-e),(3-a),(4-h),(5-f)

Q.8 WRITE A WORD OR TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS(ONE MARKS EACH)
*1) An officer who comes into contact with all the members of the company through correspondence.
*2) The authority which recommends the rate of dividend.
3) Return of investment in shares
*4) Instrument for payment of dividend.
5) Warrant attached with notice of dividend
*6) A special kind of cheque issued by a company on its banker to pay certain sum of money as dividend to its
members.
*7) Shares given free of cost to the existing equity shareholders.
*8) The shareholders to whom the bonus shares are issued.
9) Title to the shares issued by the company
10) Portion of profits distributed to the shareholders of the company
11) The letter containing reasons for low rate of dividend

ANS. 1) Secretary 2) Board of Directors 3) Dividend 4) Dividend Warrant 5) Dividend

warrant 6) Dividend warrant 7) Bonus shares 8) Equity shareholders 9) Share Certificate
10) Dividend 11) Reply Letter.

Q.9 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
1) Secretary should always provide correct, updated and tactful information
*2) A complaint letter should not be replied promptly.
3) secretary should disclose confidential information to the members
4) Share certificate must be duly signed and stamped under the common seal of the company
*5) Every company must issue or despatch a share certificate to the allottee within three months after allotment of
shares .
6) Dividend is declared and approved in the General Meeting

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 85 - STANDARD 12TH
*7) Dividend is the portion of the profits of the company which is allotted to the holders of the debentures of the
company.
8) Dividend warrant is written order given by company to its banker to pay amount mentioned in it to the shareholder
whose name is specified therein
9) Dividend is to be paid to shareholders within 30 days from the date of declaration
*10) Bonus shares means capitalisation of reserve fund.
*11) Bonus shares are issued to existing equity shareholders.
*12) Building fund is used for issue of bonus shares..
*13) Registered shareholder gets dividend through dividend coupons.
14) Secretary send reply letter to the bankers

ANS.
TRUE : 1, 2, 4, 7, 8, 9, 10, 11, 13
FALSE : 3, 5, 6, 12, 14

Q.10 FIND THE ODD ONE (ONE MARKS EACH)

1) Allotment Letter, Allotment slip, Refund Order
*2) Secrecy, Dividend, Interest.
*3) Bonus Letter, Dividend Letter, Board of Directors
*4) Dividend Warrant, Interest Warrant, Demat
*5) Secretary, Board of Directors, Dividend, Lucid Language
6) Dividend coupon, Dividend warrant, Transfer Receipt

Q.11 COMPLETE THE SENTENCE (ONE MARKS EACH)

1) Shareholders are the ……………..of the company
2) the role of secretary while writing to members is of……………..
3) share certificate must be signed by atleast ………….directors
4) Dividend is the portion of………………
*5) Dividend is recommended by .......................... .
*6) A company capitalises its Reserve Fund for issue of ……………shares.
*7) Payment of dividend must be made within ................... days of its declaration.
*8) Dividend is approved by the .......................... in the Annual General Meeting.
*9) The…….. has to communicate the decisions of the management to the members by conducting correspondence.
10) Bonus shares issued are credited to shareholders …………….Account.

ANS. 1) Owners 2) Public Relation Officer 3) 2 4) Profits 5) Board of Directors 6) Bonus

7) 30 8) Shareholders 9) Secretary 10) Dmat

Q.12 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Return on shares a) …………..
2) Capitalisation of Reserve Fund b) ………….
3) Correspondence c) ………….
4) ……………… d) Payment of Dividend electronically
(Written communication, Bonus Shares, Dividend, ECS.)

ANS 1) Dividend 2) Bonus shares 3) Written communications 4) ECS

2) A GROUP B GROUP
1) ……………. a) Directors and Members
2) …………… b) Registered Post
3) Correspondence c) ………….
4) ……………… d) Payment of Dividend electronically
(Written communication, share certificate, secretary, ECS.)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 86 - STANDARD 12TH

ANS 1) secretary 2) Share certificate 3) Written communications 4) ECS

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

1) What is politeness?
Ans. Politeness means use of polite language. A polite letter shows sympathy, respect and mutual understanding.
2) What is the time period to dispatch of the share certificate by the company?
Ans. The company must dispatch share certificate to the allottee within two months after the allotment of shares
*3) What is dividend warrant?
Ans. Dividend warrant is written order given by the company to its banker to pay amount mentioned in it to the
shareholder whose name is specified therein.
4) What is the time limit to pay the dividend?
Ans. Dividend is to be paid to the shareholders within 30 days from the date of declaration.
*5) What is capitalisation of reserve?
Ans. Capitalisation of reserves is the use of corporate reserves to pay a bonus to the shareholders in the form of
additional shares
*6) What is Dividend?
Ans. Dividend is the portion of profits of the company which is distributed to the shareholders of the company.
*7) Who recommends the rate of dividend?
Ans. The Board of Directors of the company recommends the rate of dividend.
*8) Which type of shareholders enjoys the benefit of Bonus Shares?
Ans. Equity share holders enjoy the benefit of bonus shares.
*9) What is meant by payment of dividend electronically?
Ans. Payment of dividend electronically means transfer of dividend amount through ECS (Electronic Clearance
System), NEFT (National Electronic Fund Transfer) etc.

Q.14 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
1) Secretary should follow relevant provisions of Companies Act 1986
Ans. Company Act 2013
2) Share certificate must be countersigned by the shareholder
Ans. Board of Directors
*3) Dividend is recommended by shareholders.
Ans. Board of Directors
4) Interim Dividend is declared by Board of Directors
Ans. shareholders
5) Interim Dividend is paid through cash
Ans. Electronic mode.
*6) Bonus shares are issued as a free gift to the preference shareholders.
Ans. Equity
*7) Payment of dividend must be made within 21 days of its declaration.
Ans. 30 days
*8) A company must issue the Share Certificate within three months of allotment of shares.
Ans. two
9) Rights shares are the shares given to existing share holder free of cost.
Ans. Bonus shares
*10) The person who purchases shares of the company is called Depositor
Ans. shareholder

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Allotment of shares, Application for shares, Share Certificate.
Ans. Application of shares, Allotment of shares, Share certificate
*2) Member, Applicant, Bonus Shares
Ans. Applicant, Member, Bonus Shares
*3) Reply Letter, Issue of Share Certificate, Payment of Dividend
Ans. Issue of share certificate, Payment of Dividend, Reply Letter

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 87 - STANDARD 12TH
CHAPTER 7. CORRESPONDENCE WITH DEBENTURE HOLDERS

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Draft a letter of ‘Letter of Allotment’ to debenture holder

DISHA INDUSTRIES LIMITED

Registered Office : 45/A, Maharaja complex, Panchvati Karanja Road,
Nashik - 422 003.
CIN : L50307 MH 2000 PLC160699
Phone : 022-97675877 Website : www.dishalimited.com
Fax No: 022-26266235 Email: disha5@gmail.com
Ref. No: D/DH/18/19-20 Date: 20th May, 2019.

Mr. Vijay Mittal

230, Dwarka Karanja Road,
Nashik - 422 036
Sub. : Allotment Of Debentures
Dear Sir,
In response to your application No. DI8013 dated 30th April, 2019, I am directed by the Board of
Directors to inform you that, you have been allotted 100, 10% Non-convertible secured debentures of
Rs.100/- each. The tenure of debentures ROLTA INDIA LIMITED
is for 5 years
These debenturesRegistered
are allotted
Office : Roltaper
to you as Board
Tower, ‘B’Resolution
wing, Roltapassed at Board
Technology Meeting held on
park,
16th May, 2019 and as per terms and conditions of Articles of Association
MIDC, Andheri (W), Mumbai - 400 053. of the company and Debenture
Trust Deed. CIN : L50307 MH 2000 PLC160699
The Details of Allotment of Debentures are as follows :
Phone1: 022-26205555 2 3 4 : www.roltalimited.com5
Website
Folio: 022-10206431
Fax No. No. of No. of DistinctiveE-mail
Numbers: rolta31@gmail.comAmount
Ref. R/DH/07/19-20Debentures Debentures Date : 10th June, 2019. Received
Applied Allotted (Rs.)
Mrs. Diya Saluja From To
Aditi Appartment,
D - 90 M.G.
100 Road, 100 301 400 Rs 10,000
Mira Road (E),
The Debenture Certificate is enclosed herewith.
Mumbai - 401 107.
Thanking you,
Sub. : Payment of interest on debentures. Yours faithfully,
Dear Madam,, For Disha Industries Limited
I am directed to inform you that, the Board of Directors has passed a resolution in the Board
meeting held on 05th June, 2019 regarding payment of interest on your 100, 10% Sign Non- convertible
debentures of Rs 100/- each.
(Mr. Avinash Natu)
The details of payment of interest payable to you are as follows:
Company Secretary
1 Encl :- Debenture
2 Certificate 3 4 5 6 7
Folio No. of Distinctive Numbers Gross Amt. T. D. S. Net Amt. Interest
No. Debentures of Interest (10% On of Interest Warrant
*II) Write a letter to debenture holders regarding payment of interest through Interest)
Interest Warrant
(Rs.) No.
(MAR 15, 16, 17) From To
C- 100 601 700 Rs.1,000 NIL Rs.1,000 IW 9646
240
The Interest warrant is enclosed herewith. Please detach the Interest Warrant along the perforated
line.
Thanking you,

Yours faithfully,
For Rolta India Limited.

Sign.
(Mrs. Simran Unecha)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791) Company Secretary
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S.
Encl :- Interest Warrant No. 9646 (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 88 - STANDARD 12TH

BALAJI STEEL LTD

Registered Office : Sr. No. 78, Plot No. 48, Balaji Tower,
Mall Road, Pune - 411 038.
CIN : L54430 MH 1999 PLC300477

Phone : 020-20106552 Website : www.balajisteelltd.com

Fax : 020-30205441 E-mail : balaji30@gmail.com
Ref. B/DH/30/19-20 Date : 12th March, 2019

Mrs. Amruta Dixit

30/20, Left Bhusari Colony,
Kothrud Depot,
Pune - 411 038.
Sub. : Payment of interest on debentures
Electronically through ECS or NEFT
Dear Madam,,
I am instructed by the Board of Directors to convey to you that, the Board has passed a resolution
in the Board meeting held on 10 th March, 2019 finalizing to pay interest @ 10% on Redeemable
Debentures of Rs. 100/- each for the year ending 31st March, 2019.
Your company has complied with all the provisions relating to payment of interest on debentures.
Details of Interest payable to you are as follows :
*III) Write1 a letter to debenture
2 3
holders regarding 4
payment of interest through5 Electronic Mode
6
Register No. of Distinctive Numbers Gross Amt. T. D. S. Net Amt.
No.` Debentures of Interest (10%) of
(Rs.) Interest
( Rs)
From To
C - 440 100 601 700 Rs. 1,000 NIL Rs. 1,000
Interest will be paid by electronic transfer i.e. by crediting the said interest to your bank account,
as per details provided by you to the company.
Thanking you,
Yours faithfully,
For Balaji Steel Ltd.

Sign.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791) (Mr. Nikhil Dixit)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Company Secretary
SECRETARIAL PRACTICE - 89 - STANDARD 12TH

KRISHNA ELECTRONICS LIMITED

Registered Office : 10, Krishna sadan, Shivaji Chowk,
Solapur - 413 001.
CIN : L54430 MH 1999 PLC300477

Phone : 024-97463402 Website : www.krishnaelectronicsLtd.com

Fax : 024-96429201 E-mail : krishna30@gmail.com
Ref. K/DH/31/19-20 Date : 5th June, 2019

Mr. Mahesh Malpani

20, Balaji Complex, Laxmi Road,
Solapur - 413 018.
Sub. : Conversion of Debentures into Equity Shares
Dear Sir,
I am directed to inform you that in accordance with the terms decided at the time of issue of
1,00,000, 10% fully convertible debentures, the debentures are due for conversion.
In accordance with the above, a Special Resolution was passed by the shareholders in the Extra -
Ordinary General Meeting held on 25th May, 2019 for approval of conversion of debentures into equity
shares in the ratio of 2 : 1. As per your Letter of Option you have been allotted 50 Equity shares in lieu of
100 Debentures.
*IV) Write Details
a letteroftoyour
debenture
holding holders informing
after conversion him
are as about conversion of debentures into equity shares
follows:
(Mar 17, Oct 114) 2 3 4 5
Folio No. No. of No. of Equity Distinctive Numbers Share
Debentures held Shares Issued Certificate
No.
From To
465 100 50 501 550 2219
Duly signed and executed share certificate is enclosed herewith.
Debenture Certificate will be null and void w.e.f. 25th May, 2019.
Thanking you,

Yours faithfully,
For Krishna Elecronics Ltd.

Sign.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)(Mr. Nikhin Saraf)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), Company
B.S.P.) Secretary
Encl :- Share Certificate
SECRETARIAL PRACTICE - 90 - STANDARD 12TH

SWASTIK MARBLE LIMITED

Registered Office : 30/C, Aachal Towers, Swastik Bhavan, Camp,
Pune - 411 001.
CIN : L34508 MH 2011 PLC311299

Phone : 020-23467011 Website : www.swastikmarbleltd.com

Fax : 020-23466022 E-mail : swastik30@gmail.com
Ref. S/DH/13/19-20 Date : 10th October, 2019

Mrs. Asmita Malpani

25, Narayan Peth,
Amruta Apartment,
Pune - 411 030.
Sub. : Redemption of Debentures
Dear Madam,
This is to inform you that 100000, 10% Non-convertible Debentures issued in May, 2014 are due
*V) Write a letter to debenture holders informing him about redemption of debentures
for redemption on 12th November, 2019. According to the Board Resolution No. 3462, passed at the Board
Meeting held on 8th October, 2019, Debentures shall be redeemed out of ‘Debenture Redemption Reserve
Fund’ of the company.
Please arrange to submit enclosed ‘Debenture Redemption Form’ along with the original
Debenture Certificate to the company, on or before 3rd November, 2019.
On completion of the above formalities, the redemption amount will be credited to yourbank
account.
You are requested to provide us your Bank Account details.

Thanking you,

Yours faithfully,
For Swastik Marble Limited,

Sign.
(Mrs. Usha Surti)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)Company Secretary
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Encl :- Debenture Redemption Form
SECRETARIAL PRACTICE - 91 - STANDARD 12TH

Q. 2 ATTEMPT THE FOLLOWING(FOUR MARKS EACH)

*I) what precautions are to be taken by a secretary, while drafting letters to debenture holder?
Ans. The following precautions are to be kept in mind by the Secretary while corresponding with the debentureholders -
1) Politeness (Courtesy) : Being the creditors, due respect should be given to the debentureholder in secretarial
correspondence. The tone of language in the letter should be POLITE. Rude and harsh language should be strictly avoided.
2) Prompt Response : The Secretary should promptly reply and respond to the queries and complaints of the
debentureholders without any delay.
3) Legal provisions : The Secretary should follow the statutory provisions of the Companies Act, 2013 and other relevant
laws while corresponding with debentureholders. Secretary should be cautious and careful while corresponding with
debentureholders on legal matters.
4) Transparency : To maintain greater transparency with debentureholders, it is necessary to disclose all correct and
accurate information of the company, credit rating of the company, true and real facts of companies affairs, etc. in
correspondence.
5) Conciseness : The letter to the debentureholders should be concise i.e. brief, short and to the point. Un-necessary and
irrelevant information must be avoided.
6)Precise Information : The Secretary should provide precise and up to date information to the debentureholders.
The information must be factual and true.
7) Secrecy : As a confidential officer of the company, secretary should not disclose any important and secret information
related to the company while corresponding with debentureholders.
8) Image and Goodwill of the company : While corresponding with debentureholders, the Secretary should Always try
to maintain goodwill and create a good image of the company in the mind of debentureholders.

II) Explain the different types of letters written to the debenture holders
Ans. The following are the various occasions when the Secretary writes the letters to the debentureholders of the
company
1) Letter of Allotment of Debentures : When a company allots debentures to the applicant, Letter of
allotment of debentures is sent to the debentureholders. This letter of allotment is to be preserved by the
debentureholder as he gets Debenture Certificate in exchange of this letter.
This letter contains the details of issue of debentures i.e : Number of debentures applied, Number of
debentures allotted, Distinctive numbers of debentures, Amount received, Types of debentures, Rate of Interest,
Maturity date, etc.
2) Payment of Interest : Debenture Capital is a Loan or borrowed capital of a company. Denentureholders are
the creditors and get fixed rate of interest as a return on their investment in debentures. Interest is a debt. It does not
depend upon profits.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 92 - STANDARD 12TH
Company pays interest through Interest Warrant sent along with this letter. This letter contains details such as
No. of debentures, Distinctive numbers, Gross amount of interest payable, TDS deducted, Net amount of interest
payable etc.
Board Resolution is required for the payment of interest on debentures. The company pays interest through - a)
Interest Warrant b) Electronically
4) Conversion of Debentures :
Convertible Debentures are the debentures which are converted into equity shares on the expiry of specified
period and at a specified rate mentioned in the terms of issue. After receiving Letter of Option, the secretary sends
letter informing the debentureholders that the debentures are converted into equity shares. It also states that the share
certificate will be issued to them in due course or it may be sent along with this letter.
Company has to get approval of shareholders by passing special resolution at the Extra Ordinary General
Meeting for conversion of debentures into equity shares. After receiving the approval, the company sends letter of
conversion of debentures to debentureholder
5) Redemption of Debentures : Letter of Redemption of debentures is issued to the debentureholders whose
debentures are to be redeemed after the specified period.
A Debenture Redemption Reserve Fund (DRRF) is created by the company for the purpose of redemption of
debentures.
Debenture Redemption form is sent along with this letter. This form and necessary documents have to be
submitted by the debentureholders to the company, for further procedure of redemption.
This letter informs the debentureholders that their debentures have become due for redemption

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Debenture holders are the creditors of the company

Reasons : Definition: “ Debenture includes debenture stock, bonds and any other securities of a company, whether
constituting a charge on the assets of the company.” c) . Debenture capital is borrowed capital. Debentures are
creditorship securities. D) Debenture holders are the creditor of the company. e) Debenture has been defined as
acknowledgment of the debt under the common seal of the company. Thus a debenture is a document containing of a
loan issued by a company under its common seal. f) Debentures are paid interest. The rate of interest is fixed.
Interest on debentures does not depend upon profit, it is paid regularly as an item of expense. The expense is tax
deductible. H) Debentures are issue along with agreed rate of interest payable to the debenture holder every year,
either annually or on half yearly basis. I) Debenture holders are issued debenture certificate. J) Normally
debentures are issued for the time span ranging between 3 years to 10 years. K) Debentures generally contains a
charge on the assets of the undertaking or some class of assets or even part of its profits or there may not be a charge
like unsecured debentures. L) Debentures may be convertible into equity shares at the option of debenture holder in
case of convertible debentures.
Debenture is the borrowed capital. A debenture holder is a creditor of the company.

*II) There are certain circumstances when a secretary has to correspond with debenture holder
Reasons Refer to Q. 2(II)

*III) The company secretary should take certain precautions while corresponding with debenture holders
Reasons. a) Secretary has to be more careful while drafting the letters. The languages used in the letter should be
courteous i.e. showing the respect to the debenture holders.. b)Prompt reply should be given to the queries raised
by debentureholders. C) The letter should be short and precise containing the important information. The data –
provided in the letter should be up to date. D) . F) The Secretary should compulsorily follow relevant
provisions of the Companies Act, 2013 with latest amendments and other relevant laws F) The Secretary
should try to project good image of the company in every situation
Company secretary should take certain precautions while corresponding with debentureholders.

*IV) The company secretary should follow legal provisions while corresponding with Debenture hodlers
Reasons. a) debenture holders are the creditors of the company and hence, secretary has to correspond with Debenture
Holders on different occasions. B)The secretary should compulsorily follow relevant provisions of the Companies
Act, 2013 with latest amendments and other relevant laws C) Secretary should be cautious and careful while
corresponding with the debenture holders on legal matter. He should be aware of the legal effects. D) No0n
compliance with legal provisions can result into legal consequences, creating problems for the company
So, The company secretary should follow legal provisions while corresponding with Debenture hodlers

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 93 - STANDARD 12TH
*V) Interest is a debt,.
Reasons. a) Debenture Capital is a Loan or borrowed capital of a company. B)Denentureholders are the creditors
and get fixed rate of interest as a return on their investment in debentures. C) Interest is a debt. D) Interest is to
be paid compulsorily even if the company makes loss. It does not depend upon profits.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

I) What is debenture? Explain the Debenture Capital?

Ans. Ans. Ans. Derived from: The word ‘Debenture’ is derived from the Latin word ‘debere’ which means ‘to owe’.
Introduction: Debenture has been defined as acknowledgement of the debt under the common seal of the company.
The person holding debentures are called as debenture holders. They are given interest. Debenture issue is governed
by Sec.117-120 of the Companies Act, 1956.
Meaning: “ Debenture includes debenture stock, bonds and any other securities of a company, whether constituting a
charge on the assets of the company or not”.[Sec.2(12)]
The Features of Debentures are:
a) Borrowed Capital: Debenture capital is borrowed capital. Debentures are creditorship securities.
b) Creditor: Debentureholders are the creditor of the company.
c) Acknowledgement of Debt: Debenture has been defined as acknowledgement of the debt under the common seal
of the company. Thus a debenture is a document containing evidence of a loan, issued by a company under its
common seal.
d) No Voting Rights: Sec. 117 of the Act provides that no company can issue any Debentures carrying voting rights.
e) Interest: Debentureholders are paid interest. The rate of interest is fixed. Interest on debentures does not depend
upon profit, It is paid regularly as an item of expense. The expense is tax deductible.
f) Payment of Interest: Debentures are issued along with agreed rate of interest payable to the debenture to the
debenture holder every year; either annually or on half yearly.
g) Debenture certificate: Debentureholders are issued debenture certificate.
h) Timeframe: Normally debentures are issued for the time span ranging between 3 years to 10 years.
i) Charge: Debentures generally contains a charge on the assets of the undertaking or some class of assets or even part
of its profits or there may not be a charge like Unsecured debentures.
j)Conversion: Debentures may be convertible into equity shares at the option of debentureholders in case of
convertible debentures.
k) Register of Debentureholders (Sec. 152): A company is required to maintain Register of debentureholders at the
Registered office of the company as per the companies act

II) State any four precautions to be taken while drafting letters to the debenture holders
Ans. Refer to Q. 2(I)

III) When does a secretary enters into correspondence with debenture holders?
Ans. Under the following circumstances a secretary is required to write letters to the debentures holders.
1) Allotment of debentures : After the allotment criteria approved by the Board, a secretary has to draft the letters of
allotment to the applicants to whom debentures are allotted. A secretary sends allotment letters to inform allottees
about the number of debentures allotted to them and the total amount due against the debentures, last date of payment
of allotment money etc.
2) Redemption of debentures : In respect of redemption of debentures, the secretary sends two letters, viz. i) Letter
requesting the debenturesholders to return the debenture certificate to the company and ii) letter to specify the amount
of debentures due for payment.
3) Conversion of debentures : In respect of fully convertible debentures, the secretary has to draft two letters, viz i)
Letter requesting debentureholder to return the debenture certificate ii) letter informing the dispatch of the share
certificates.
In respect of partly convertible debentures, the secretary has to draft 3 letters i) letter requesting the
Debentureholders to return debenture certificate ii) letter informing the dispatch of the share certificates iii) letter
specifying the amount due for payment on the redemption of the remaining debentures. This letter is accompanied by
a refund order
4) Payment of interest on debentures : In this respect, the secretary has to draft a letter giving the full details about
the interest due on the debentures. The refund order is sent along with this letter for the payment of interest. Or it is
paid electronically through ECS or NEFT

Q.5 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 94 - STANDARD 12TH

*I) As a secretary of Velon Industries Ltd.

A) Give any three circumstances where company will have to correspond with the debenture holders.
Ans. secretary will correspond with members on following occasions.
i) Allotment Letter to debenture holder ii) Payment of Interest iii) Redemption of debentures
B) What precautions should be taken while drafting the letters
Ans. As a secretary, one should be polite, transparency should be maintained and image of the company should be
kept in mind while drafting the letters.
C) Board Resolution is necessary for the payment of interest?
Ans. Yes, Board Resolution is necessary for the payment of interest.

II) Disha Industries Ltd. Allots debentures to Mr. Vijay Mittal

A) Which letter will be sent to Mr. Vijay Mittal.
Ans. Letter of allotment of Debentures will be sent to Mr. Vijay Mittal
B) why does Vijay Mittal preserve Allotment Letter?
Ans. Mr. Vijay Mittal preserves the allotment letter because he will receive Debenture Certificate in exchange of the
allotment letter..
C) What details does the letter contain?
Ans. The letter contains the details of issue of debentures i.e. number of debentures applied, number of debentures
allotted, distinctive number of debentures, amount received, types of debentures, rate of interest maturity date etc.

III) Rolta India Limited wants to pay interest to the debenture holders
A) Which resolution is required for the payment of interest to debenture holders?
Ans. Board Resolution is required for the payment of interest to debenture hodlers
B) Can the company pay interest in the next year as in the current year company has incurred loss?
Ans. No, the company has to pay the interest as it does not depend upon the profits of the company
C) How can the company pay interest to the debenture holders?
Ans.The company can pay interest to debenture holders by the way of interest warrant and electronic mode i.e. ECS
and NEFT.

Q.6 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Debentures
Ans. a) Debenture represents the borrowed capital of the company b) Debenture is an acknowledgement of debt
given to the company c) Debenture capital is also known as the ‘Supporting Capital’ of the company

*II) Debenture holders

Ans. a) the person who buys Debenture of the company is known as ‘Debenture Holders’ b) Debenture holder is
the creditor of the company and has no right to participate in the management of the company c) They get fixed
rate of interest as a return on their investment.

*III) Courtesy
Ans. a) Courtesy means politeness. B) The secretary has to be polite while corresponding with debenture holders.
Due respect should be given to them being the creditors of the company. C) The language in the letter should be
courteous Rude and harsh words should be avoided.

*IV) Consciences
Ans. a) Consciences refers to avoiding irrelevant and unnecessary information b) As far as possible the letter
should be brief, short and to the point so that, the reader should develop interest in reading it.

*V) Precise Information

Ans. a) Precise Information means providing timely and upto date information b) The data given in the letter must
be accurate and based on the factful information

*VI) Debenture certificate

Ans. a) Debenture Certificate is an acknowledgement of debt given to the company b) It is issued under the
common seal and signature of two directors of the company as a witness c) It contains the name of Debenture
holder, number of debentures, type of debenture, rate of interest, maturity etc.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 95 - STANDARD 12TH
*VII) Interest on debentures
Ans. a) The returns paid on investments in Debentures is known as ‘Interest’ b) The Rate of Interest on
Debentures is decided at the time of issue of Debentures c) Debenture holders get fixed rate of interest which does
not depend on the profit of the company

*VIII) Interest Warrant

Ans. a) Interest Warrant is an instrument or payment of interest to the Debenture holders b) It is like a crossed
cheque which can be encashed through the Debenture holders bank account

*IX) Conversion of Debentures

Ans. a) Conversion of Debentures means converting Debentures into equity shares. B) Convertible Debentures
are those Debentures which are not repaid on maturity but converted into equity shares. C) Before conversion
they enjoy all rights of creditors whereas after conversion they get all benefits of owner

*X) Redemption of Debentures

Ans. a) Redemption means Repayment b) Debenture represents borrowed capital of the company and hence, it
has to be repaid c) Redeemable Debentures are repaid at the time of maturity, it is medium term capital.

Q.7 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1) Debenture capital is a .................. capital of a company.
a)borrowed b) owned c) permanent
*2) Debentureholders are ................. of the company.
a) Owners b) Creditors c) Debtors
3) Debenture hodlers receive………………….as a proof of their investment in the company
a) share certificate b) Debenture Certificate c) Share Warrant
*4) Borrowed Capital is provided to the company by ......................
a) Equity shareholder b) Debentureholder c) Preference shareholder
5) ……………have no right to attend company’s meetings
a) Share holders b) Directors c) Debenture holders
*6) Interest on Registered Debentures is given through ................. .
a) Interest coupons b) Interest warrant c) Refund order
*7) ................. are the creditors of the company.
a) Shareholders b) Debentureholders c) Directors
8) ………..have priority in the repayment of the capital at the time of winding up of the company.
a) Debenture holders b) Shareholders c) Secretary
*9) Bearer Debentureholders get interest through ........................... .
a) Interest Warrants b) Refund orders c) Interest coupons
10) Debentures are secured through charge on the …………..of the comapny
a) Liability b) Profits c) Assets
*11) Return of income on debentures is ................. at fixed rate.
a) Dividend b) Loan c) Interest
*12) ................. is an acknowledgement of debt issued by the company under common seal.
a) Debentures b) Shares c) Reserve
*13) Debentures repayable after a certain period are …………..debentures.
a) Convertible b) Registered c) Redeemable
14) The fund created for the redemption of debentures is known as………..
a) DRRF b) DHFL c) IEPF
15) Debentures are repaid on maturity by using debenture…………reserve
a) Redemption b) Depreciation c) General
*16) The rate of interest payable on debentures is ................. .
a) uncertain b) floating c) fixed
*17) Debentureholders receive ............................ certificate from the company.
Share b) Bond c) Debenture
*18) Interest warrants are sent to ............................ of the company.
a) Shareholders b) Debentureholders c) Owners
19) Debenture holder has the right to inspect …………….
a) Partnership deed b) Memorandum of Association C) Trust Deed
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 96 - STANDARD 12TH
20) From the date of request, trust deed should be provided by the company within………….
a) 14 days b) 7 days c) 21 days
21) Communication in writing means…………….
a) Correspondence b) Motion c) Voting
22) Debentures are issued after passing resolution at…………….
a) Board Meeting b) General Meeting c) Committee Meeting

Q.8 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Debenture holder a) Borrowed Capital
2) Interest on debenture b) Interest Coupons
3) Convertible Debentures c) Evidence of Loan
4) Debenture certificate d) Safe and Secured Investment
5) Investment in debentures e) Interest warrant
6) Redeemable Debentures f) Conversion into Debentures
7) Debentures g) Risky debentures
h) Evidence of shares
i) Creditors
j) Conversion into equity shares
k) Redeemed after fixed period
l) Redeemed at winding up of the company
m) Owner
n) Owned Capital
Ans. (1-i),(2-e),(3-j),(4-c),(5-d), (6-k), (7-a)

*2) A GROUP B GROUP

1) Courtesy a) Wrong Publicity
2) Prompt Response b) True and Real Facts
3) Transparency c) Politeness
4) Conciseness d) Upto date information
5) Precise Information e) Reply without delay
6) Secretary f) Irrelevant Information
7) Goodwill g) Hide Information
h) Confidential Officer
i) False and incorrect information
j) Rude and Harsh wording
k) Brief and to the point
l) Delay in replying
m) Good image of the company
n) Disclose Secrets
Ans. (1-c),(2-e),(3-b),(4-k),(5-d), (6-h), (7-m)

Q.9 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
1) Capital raised by the company by issuing debentures.
*2) Return on investment in debentures.
3) Rate of interest on debentures
*4) Documentary evidence of holding the debentures.
*5) Status of debentureholders.
*6) Debentures which can be converted into equity shares.
7) Debentures which are secured by charge on the assets of the company
*8) The person who purchases debentures of the company.
*9) An acknowledgement of debt issued by the company under its common seal.
*10) Debentures whose name is mentioned in the Register of debentureholders.
11) Debentures which are redeemable after certain period of time
12) The Debenture Holder has a right to inspect and obtain copies of this deed
13) Debenture holder who gets interest through interest coupons
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 97 - STANDARD 12TH
14) The debentures are issued to the public by issuing this document
15) the type of debentures which can be converted into equity shares.

ANS. 1) Debenture capital 2) Interest 3) Fixed 4) Debenture Certificate 5) creditor

6) convertible Debentures 7) Secured Debentures 8) Debenture holders 9) Debenture 10)
Registered Debenture 11) redeemable Debentures 12) Trust Deed 13) Bearer Debenture holder
14) Prospectus 15) Convertible Debentures

Q.10 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Debentureholders get regular dividend.
*2) Debenture is a loan capital of the company.
*3) Convertible Debentures can be converted into equity shares.
*4) Interest on debentures is paid notwithstanding the volume of profit.
*5) Debentureholders enjoy full membership rights of the company.
*6) Dividend warrants are used to pay interest to the debentureholders.
*7) All types of debentures are eligible for conversion into equity shares.
*8) Debentures are never redeemed by the company.
*9) Debentureholders are the owners of the company.
10) Debenture holders are the creditors of the company
11) debenture holders enjoy normal voting rights
*12) Debentures are always fully paid-up.
13) Debenture can issued to more than 500 people without appointing Debenture Trustees
14) Debenture certificate is issued within 6 months from the date of allotment of debentures
15) Secretary is the confidential officer of the company

ANS.
TRUE : 2, 3, 4, 10, 12, 14,, 15
FALSE : 1, 5, 6, 7, 8, 9, 11, 13,

Q.11 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Debentureholder is a .......................... of the company.
*2) Company issues .......................... certificate to the debentureholder after allotment of debentures.
*3) Debentureholder gets .......................... at fixed rate as a return or income.
*4) In case of Registered Debentures, Interest .......................... are used to pay interest.
*5) The .......................... has to correspond with debentureholders on important occasions.
*6) The person who purchases the debentures of a company is called .......................... .
*7) Interest does not depend upon .......................... of the company.
*8) Company cannot issue debentures with……………… rights.
*9) Debenture certificate should be issued within a period of .......................... months, from the date of allotment of
debentures.
*10) A company cannot issue debentures to more than 500 people without appointing a ..........................
*11) The power to issue debentures has been vested with the ..........................
12) Convertible Debentures are converted into……………on the maturity
13) redeemable debentures are………..on the date of maturity
14) Registered debenture holders get interest through………….
15) Bearer Debenture holders get interest through ………..
16) Secured Debentures are secured by……….on the assets of the company
17) Being the creditors, due……….should be given to the debenture holders while corresponding
18) the secretary should follow the………….of the Company Act 2013
19) As a confidential Officer of the company, secretary should not disclose any important and
…………….information related to the company while corresponding
20) The information provided by the secretary must be factual and …………

ANS. 1) Creditor 2) Debenture 3) Interest 4) Warrants 5) Secretary 6) Debenture

holders 7) Profit 8) Voting 9) 6 10) Debenture Trustee 11) Board of Directors 12)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 98 - STANDARD 12TH
Equity shares 13) Repaid 14) Interest warrant 15) Interest Coupons 16) Charge 17)
Respect 18) Statutory Provisions 19) Secret 20) True

Q.13 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Return on Debentures a) …………..
2) Debenture certificate b) ……………
3) ……………… c) Debenture holders
4) ……………… d) Debentures
5) ……………… e) Power to issue Debentures
6) Interest warrant f) ……………..
7) ……………… g) Interest coupons
8) ………………. H) Secured debentures
(Debt Capital, Board of directors, Creditors, Within 6 months, Interest, Bearer Debentures, Registered
Debentures, Charge on the Assets)

ANS 1) Interest 2) Issued within 6 months 3) Creditors 4) Debt Capital 5) Board of Directors.
6) Registered Debentures 7) Bearer debentures 8) Charge on the Assets

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) Who is Debenture holders?
Ans. The person who purchases Debentures of the company is known as ‘Debenture holder’.
*2) What is the income of Debenture Holder?
Ans. The income received by the Debenture Holder is the fixed rate of interest
*3) What is Debentures?
Ans. Debenture is an acknowledgement of debt received by the company
*4) What are Convertible Debentures?
Ans. Convertible Debentures are the Debentures which are converted into equity shares.
*5) Who takes decisions to allot the debentures?
Ans. Board of Directors take decision to allot the debentures
*6) Which form is enclosed along with the letter of redemption of debentures?
Ans. Debenture redemption form is enclosed along with the letter of redemption of Debentures.
*7) Which Certificate will be issued after Allotment of debentures?
Ans. Debenture Certificate will be issued after allotment of debentures.
8) Who is appointed when issue of debentures exceed more than 500 people?
Ans. Debenture Trustees are appointed when the issue of debenture exceeds more than 500 people
9) Debenture certificate should be issued within how many months from the date of allotment of Debentures?
Ans. debenture Certificate should be issued within 6 months from the date of allotment of debentures
10) Which debentures are converted into equity shares?
Ans. Convertible Debentures are converted into equity shares
11) Who has to communicate the decisions of the management and other information to the Debenture Holder
Ans. The secretary has to communicate the decisions of the management and other information
12) Which fund is created for Redemption of Debentures?
Ans. A Debenture Redemption Reserve Fund is created for redemption of Debentures

Q.15 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) The person who purchases debentures of the company is called shareholder.
Ans. Debentureholder
*2) Debentureholders get regular dividend at fixed rate.
Ans. Interest
*3) A Share Certificate must be issued after allotment of debentures.
Ans. Debenture certificate
*4) A Debenture Redemption Reserve Fund is created by the company for the redemption of Shares
Ans. Debentures.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 99 - STANDARD 12TH
*5) A Demat Request Form is sent alongwith the letter of Redemption of Debentures.
Ans. Debenture Redemption Form
*6) A company must issue Debenture Certificate within 8 months of allotment of debentures.
Ans. 6 months
7) Debenture carry fluctuating rate of interest as a return on investment in debentures
Ans. fixed
8) Debenture capital is owned capital of the company
Ans. borrowed

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Board Resolution, Allotment of Debentures, Board Meeting.
Ans. Board Meeting, Board Resolution, Allotment of Debentures
*2) Interest warrant, Allotment of debentures, Board Meeting
Ans. Board Meeting, Allotment of Debentures, Interest
3)Redemption of Debentures, Debentures Redemption Reserve Fund, Debenture Redemption Form
Ans. Debenture Redemption Reserve fund, Debenture Redemption Form, Redemption of Debentures

CHAPTER 8. CORRESPONDENCE WITH DEPOSITORS

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

GURU INDUSTRIES LTD
*I) Draft a Letter of Thanks to Depositors of a company
Ans. Registered Office : 45, Guru Towers, J. M. Road,
Pune 411 021.
CIN : L30121 MH 2007 PLC070504
Phone : 020-12110072 Website : www.gurulimited.com
Fax : 020-30040077 E-mail : guru30@gmail.com
Ref. No. G/DEP/09/19-20 Date : 10th April, 2019

Mr. Sharangdhar Naik

78/68, Guru Appartment, Shaniwar Peth,
Pune - 411 011.
Sub. : Thanking Depositor for Fixed Deposit

Dear Sir,
We are in receipt of your application dated 5th April 2019 for investment of ` 1,00,000 in the fixed
deposit as per terms and conditions stated in advertisement for a period of 2 years. We are thankful to
you for the initiative and the trust you have shown in depositing a substantial amount in our company.
The details of deposits accepted are given in the following schedule :
1 2 3 4 5
Fixed
Q. I) ANSWER Amount of Period of Rate of Interest Bank Details
Deposit Deposit (Rs) Deposit (%)
Receipt No. (years)
Name of the Bank
Bank Account No.
678 Rs 1,00,000 2 years 12.5% City Bank 222040
The Board of Directors of our company expresses its gratitude for depositing money in our
company.
We assure you of our best services and thank you for the confidence shown in our company.
Thanking you,
Yours faithfully,
For Guru Industries Ltd.,

Sign
Mr. Nitin Modi
General Manager and Company
Secretary
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Encl : Fixed Deposit Receipt No. 678
SECRETARIAL PRACTICE - 100 - STANDARD 12TH

KISHOR TEXTILE LTD

Registered Office : 104/B, Bombay House, S. V. Road, Borivali (W),
Mumbai 400 103.
CIN : L05065 MH 2000 PLC430644

Phone : 022-60304636 Website : www.kishortesxtilelimited.com

Fax : 022-40202323 E-mail : kishortext30@gmail.com
Ref. No. K/DEP/34/19-20 Date : 28th July, 2019

Mrs. Lata Dixit

C-702, Madhuban Apt., Shivaji Nagar,
Camp, Pune - 411 001.

Sub. : Payment of Interest on Fixed Deposits

Dear Madam,
I am instructed by the Board of Directors to inform you that the interest @10% on your Fixed
Deposit approved by the Board has become due. We are enclosing herewith ‘Interest Warrant’ No. 3345,
dated 25th July, 2019 drawn on Axis Bank, Borivali Branch for ` 2,500/-. Your company has complied
with all the provisions relating to payment of interest on deposits The details of your Fixed Deposit and
*II) Draft a letter
interest to on
payable a depositor informing
deposit are himfollowing
given in the about payment
scheduleof: interest through Interest warrant
1 2 3 4 5 6 7
Interest Fixed Deposit Rate of Gross TDS @ Net Amount
Warrant No. Deposit Amount Interest (%) Amount of (10%) of Interest
Receipt. (Rs.) Interest Payable
No. (Rs)
3345 2032 Rs.25,000 10% Rs 2,500 NIL Rs 2,500/-
Interest Warrant is enclosed herewith.
Please detach the Interest Warrant along the perforated line.
Thanking you,

Yours faithfully,
For Kishor Textile Ltd.,

Sign
Mr. Nikhil Dixit
Company Secretary
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
Encl : Interest Warrant
SECRETARIAL PRACTICE - 101 - STANDARD 12TH

NOVEL SEWING MACHINES LTD.

Registered Office : Survey No. 78, Plot No. 48, Novel Sadan, D.P. Road, Bavdhan,
Pune : 411 038
CIN : L302090 MH 2000 PLC070504
Phone : 022-60603021 Website : www.novelsewingltd.com
Fax : 020-96864636 E-mail : novelsewing07@gmail.com
Ref. No. N/DEP/10/19-20 Date : 5th April, 2019

Miss. Kshitija Bihani

125, Laxmi Road Narayan Peth,
Pune : 411 030
Sub. : Payment of Interest on Fixed Deposit
Electronically through ECS or NEFT.

DearaMadam,
*III) Draft letter to a depositor informing him about payment of interest through electronic mode
I am instructed by the Board of Directors to convey to you that the Board has passed a resolution
in the Board meeting held on 12th March,, 2019 to pay interest @ 10% on deposits for the year ending
31st March, 2019.
Your company has complied with all the provisions relating to payment of interest on deposits.
Details of Interest payable to you are as follows :
1 2 3 4 5 6
Fixed Deposit Rate of Gross TDS @ (10%) Net Amount of
Deposit Amount (Rs) Interest (%) Amount of Interest
Interest (Rs)
Receipt. No. payable (Rs)
2032 Rs. 25,000 10% Rs 2,500 NIL Rs 2,500
Interest will be payable by electronic transfer (ECS/NEFT), i.e. by crediting said interest to your
bank account as per details provided by you to the company..
Thanking you,

Yours faithfully,
For Novel Sewing Machine
Ltd.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.) Sign
Miss. Sarita Singh
SECRETARIAL PRACTICE - 102 - STANDARD 12TH

DIAMOND INTERNATIONAL LTD.

Registered Office : 24, Dimond House, Nariman Point,
Mumbai 400 021
CIN : L15522 MH 2000 PLC301244

Phone : 022-50202113 Website : www.dimondlimited.com

Fax : 022-20304112 E-mail : dimond5@gmail.com
*IV) Write a letter to the depositor for renewal of his deposit (OR)Date : 22nd March, 2019.
Ref. No. D/DEP/61/19-20
Draft a letter to depositor for renewal of his deposit.
Ans. Miss. Ashi Singh
26, Gulmohar Apartment,
Andheri (W),
Mumbai - 400 058.
Sub. : Renewal of Fixed Deposit

Dear Madam,
We hereby acknowledge the receipt of your application for renewal of deposit of Rs 1,00,000 for
a further period of two years. Alongwith the application we have also received original Fixed Deposit
Receipt (FDR) No. 4625, and the same has been placed before the Board for consideration and approval.
The Board of Directors by passing a resolution at the Board meeting held on 17th March, 2019
has decided to renew the deposits for a further period of 2 years on the same terms and conditions.
A Deposit Receipt No. 5925 is enclosed along with this letter.
Thanking you,

Yours faithfully,
For Diamond International Ltd.

Sign
Miss Kavya Ambani
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
Company Secretary
( M.COM.(COSTING), D.T.L.,
Encl : Fixed G.D.C.A.,
Deposit P.G.D.B.M.,LL.B.,M.B.S.
Receipt No. 5925 (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 103 - STANDARD 12TH

DHARA OIL LTD.

: Registered Office :
64, Dhara Bhavan, Pimpri Road, Pune - 411 018.
CIN : L55331 MH 1996 PLC302177

Phone : 022-65254023 Website : dharaoillimited.com

Fax : 020-49396423 E-mail : dhara16@gmail.com
Ref. No. D/DEP/16/19-20 Date : 13th November, 2019

Mr. Ravindra Khanna

C-15, Swami Apartment,
Narayan Peth, Pune - 411 030

Sub. : Repayment of Fixed Deposit

Dear Sir,
This is to inform you that your Fixed Deposit Receipt No. 5925 dated 1st December, 2017
for Rs.1,00,000/- will be due for repayment on 30th November, 2019.
We have received from you the original Deposit Receipt No. 5925 duly discharged along with
*V) Draft
youra letter to thefor
instruction depositor regarding
repayment. redemption
The Board or repayment
of Directors of hisheld
in the meeting deposit
on 12th Novemeber, 2019
has passed a resolution for redemption of the deposits.
The details of repayment of deposit are as under :
1 2 3 4 5 6 7 8
Tenure of Fixed Deposit Rate of Maturit TDS Net Amt. Due Date
Deposit Deposit Amt. Int. y Amt. (10%) of
Receipt. (Rs) (10%) (Rs) Deposit
no.
2 years 5925 Rs. Rs. Rs. Rs. Rs. 30th Nov,
1,00,000 20,000 1,20,000 2,000 1,18,000 2019
Please find enclosed herewith a crossed cheque of Rs. 1,18000, bearing No. 426025 dated 30th
November, 2019 drawn on Bank of Maharashtra, Shivaji Nagar, Pune - 411 005.
Thanking you,

Yours faithfully,
For Dhara Oil Ltd.

Sign
Mr. Ashok Bhattad
Company Secretary
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L.,Cheque
Encl : Crossed G.D.C.A.,
No. P.G.D.B.M.,LL.B.,M.B.S.
426025 (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 104 - STANDARD 12TH

Q.2 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) The company Secretary should take certain precautions while corresponding with depositors
Reasons a) Deposit represents short term borrowed capital of the company b) Depositors are the creditors of the
company c) The company secretary should correspond properly with the depositors in order to ensure continuous
flow of investments. D) The reply to queries and complaints of depositors should be prompt and courteous E)
Letter should be written from depositor’s view point and accurate information must be supplied to them. F) All
the legal provisions must be followed and the goodwill of the company has to be maintained.
So, The company Secretary should take certain precautions while corresponding with depositors.

*II) There are certain circumstances when a secretary has to correspond with depositors
Reasons a) Depositors are the creditors of the company and not the owners. B) Frequent correspondence with
depositors is not required as they do not participate in the management of the company c) Company secretary has
to conduct correspondence with depositors regarding acceptance of deposit, payment of interest on deposits, renewal
of deposit, repayment of deposit etc. d) secretary conducts such correspondence on behalf of the company also as
per the instructions of the Board of Directors e) The secretary should be very cautious and careful while
corresponding with depositors of the company
So, secretary has to correspond with depositors on certain circumstances.

III) Public Deposits can be renewed after the maturity period.

Reasons a) Deposits are unsecured loan offered to the company b) deposits can be accepted for a minimum
period of 6 months and maximum period of 36 months c) If the Depositor agrees, deposits can be renewed for a
further period d) Renewal may take place with same terms and conditions or may be with different terms and
conditions. E) For renewal, the depositor has to submit the old deposit receipt with the renewal request. F)
The company will cancel the old deposit receipt and issue the news deposit receipt G) The depositor enjoys fixed
rate of interest till further maturity.
Thus, public deposits can be renewed after the maturity period.

IV) Deposits are repaid on maturity

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 105 - STANDARD 12TH
Reasons a) Deposits are unsecured loan offered to the company b) deposits can be accepted for a minimum
period of 6 months and maximum period of 36 months c)The company is liable to pay regular interest on deposits
at a fixed rate along with principal amount of maturity. D) On maturity of tenure of deposits, it is binding on the
company to repay the deposit e) Default in repayment of deposit results in the levy of penalty F) The letter of
repayment of deposit is to be sent to the depositor, when the deposit is to be redeemed (repaid).
Thus, deposits are repaid on maturity.

V) Correspondence with the depositors enhance goodwill of the company

Reasons a) The depositors of the company are the creditors of the company b) They provide borrowed capital to
the company to meet its working capital needs c) A proper correspondence with the depositors is helpful to
convey proper information about their investments D) It establishes good relations between company and
depositors which ultimately helps to generate goodwill in the corporate Market

Q.3 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Which precautions are to be taken by the secretary while corresponding with depositors?
Ans. The following precautions are to be kept in mind by the Secretary while corresponding with the depositors
1) Legal Provisions : The Secretary should ensure that provisions relating to invitation, acceptance, renewal
and repayment of deposits are duly complied with by the company, while corresponding with depositors. Secretary
should observe the legal provisions.
2) Courtesy : Polite replies are essential while writing letters to the depositors. Rude words should be strictly
avoided.
3) Prompt Response : The Secretary should give prompt replies to the queries and complaints of the depositors
without any delay.
4) Accuracy : Letter written to the depositors should be accurate and precise. Factual and correct information
should be provided to them.
5) Image and Goodwill : While writing letters, the Secretary has to maintain the goodwill of the company.
6) You Attitude : Letter should be written from depositors point of view, after taking into consideration the
requirements of the depositors.
7) Conciseness : The letters must be concise i.e. short, brief and to the point. Un-necesssary and irrelevant
information should be avoided.
8) Maximum Secrecy : It is necessary to maintain maximum secrecy as regards secretarial correspondence
with depositors.

*II) Under what circumstances secretary has to enter into correspondence with depositors?
Ans. The Secretary has to communicate various decisions of the Board of Directors to the depositors.
The following are the few circumstances when the Secretary enters into correspondence with the
Depositors :
1) Thanking depositors for depositing amount and showing faith in the company.
2) Intimation about payment of interest through – a) Interest Warrant b) Electronic payment of Interest
3) Letter informing about renewal of deposits.
4) Informing depositors about repayment of deposit on maturity

Q.4 EXPLAIN THE FOLLOWING TERMS/CONCEPTS. (FOUR MARKS EACH)

*I) Depositor
Ans. The person who keeps depositors with the company for a fixed period of time is known as ‘Depositor’

*II) Deposit
Ans. Deposit is a short term source of finance of the company and it is used in order to satisfy short term working
capital needs of the company

*III) Interest of Deposit

Ans. Interest on deposit refers to the return on the investment of money in deposits

*IV) Deposit Receipt

Ans. Deposit Receipt is an acknowledgement of deposit money accepted by the company

*V) Renewal of Deposit

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 106 - STANDARD 12TH
Ans. Renewal of Deposit means accepting the same deposit for an additional period of time after its maturity

*VI) Repayment of Deposit

Ans. Refunding the amount of deposit on maturity of tenure of deposits, is known as ‘Repayment of Deposit’

Q.5 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) Depositors are .......................... of a company.
a) Members b) Creditors c) Debtors
*2) Depositors provide .......................... Capital to the company.
a) Short Term b) Long Term c) Medium term
*3) A Company cannot accept deposit for more than………… months.
a) 24 b) 36 c) 45
*4) A company cannot accept deposit for less than……..months.
a) 6 b) 3 c) 5
*5) Deposits are .......................... loans of the company.
a) fixed b) short term c) long term
*6) Public Deposits are accepted to meet the requirement of………….. Capital.
a) fixed b) working c) owned
*7) .......................... has the power to invite deposits from Public.
a) Shareholders b) Auditors c) Board of Directors
*8. Rate of interest on deposits is .......................... .
a) fixed b) fluctuating c) moderate
*9) The return or income for the investment of money on deposits is called .......................... .
a) Dividend b) Interest c) Discount
10) ……………capital is raised by accepting deposits
a) Owned b) Fixed c) borrowed
11) Deposits are accepted to fulfill ………….capital need of the company
a) working b) fixed c) owned
12) A company can accept deposit for minimum …………….months
a) 12 b) 36 c) 6
13) Person investing in company’s deposit is called ………….
a) depositor b) debenture holder c) shareholder
14) Company makes payment of interest on deposits after deducting…………
a) ACS b) CGS c) TDS
15) Company can also make electronic payment of interest through…………..
a) DGFT b) NEFT c) IEPF
16) A government company can accept maximum…………percent deposit.
a) 25 b) 35 c) 30
17) A private company can accept deposits from…………..
a) directors b) government c) public

Q.6 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Depositors a) Fixed
2) Rate of interest on deposits b) Evidence of Ownership
3) Deposit Receipt c) Debtors
4) Electronic Payment of Interest d) creditors
5) Factual Information e) Evidence of deposit
f) Fluctuating
g) DGFT
h) Accuracy
i) NEFT
j) Prompt replies
Ans. (1-d),(2-a),(3-e),(4-i),(5-h),

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 107 - STANDARD 12TH
*2) A GROUP B GROUP
1) Deposit maturity a) Letter of renewal
2) Accuracy b) Investment upto Rs. 25,000/-
3) Deposit Receipt c) 21 days
4) Small Depositors d) Precaution
5) Renewal of Deposit e) 36 months
f) Creditors
Ans. (1-e),(2-d),(3-c),(4-b),(5-a)

Q.7 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
*I) Return on investment on deposit.
*II) Instrument for payment of interest on deposit.
*III) An acknowledgement of the fixed deposit accepted by a company.
*IV) Return of deposits on maturity date.
*V) Maximum period of deposits.
VI) Person who invests in a company’s deposits
VII) The status of the deposit holder in the company
VIII) Amount deducted from gross interest exceeding Rs. 10,000/-
IX) Avoiding rude and harsh words while writing letters to the depositors means
X) The way of writing letters from depositors point of view

ANS. 1) Interest 2) Interest Warrant 3) Fixed Deposit Receipt 4) Repayment of Deposit

5) 36 months 6) Depositor 7) Creditors 8) TDS 9) Courtesy 10) You Attitude

Q.8 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Fixed deposit is a short term source of finance for the company.
*2) Fixed Deposit holder is creditor of the company.
*3) Deposits are invited by the company without issuing statutory advertisement.
*4) Fixed Deposit holders are entitled to receive dividend.
*5) A Private Company cannot accept the deposits from the general public.
*6) Depositors are given voting rights.
7) Deposit represents owned capital of the company
8) Fixed deposit is a long term source of finance
9) Company Secretary has to follow legal provisions while corresponding with depositors
10) Correspondence with depositors helps to maintain goodwill of the company
11) The deposit receipt should be issued within 21 days from the date of the acceptance of deposit
12) Government Companies can raise deposit upto 35 percent

ANS.
TRUE : 1, 2, 5, 9, 10, 11, 12
FALSE : 3, 4, 6, 7, 8,

Q.9 FIND THE ODD ONE(ONE MARKS EACH)

*1) Dividend, Depositor, Deposit Receipt
*2) Trust Deed, Depository, Deposit Receipt
3) Repayment of Deposit, Convertible Debentures, Renewal of Deposit
4) Depositor, Creditor, Evidence of Ownership
5) 6 months, 25 months, 36 months

Q.10 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Depositors are the .......................... of the company.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 108 - STANDARD 12TH
*2) The .......................... must be cautious and careful while writing letters to the depositors.
*3) Deposit is a .......................... term source of finance of the company.
*4) A company can accept deposits for the minimum period ofmonths.
*5) Depositors are entitled to receive .......................... at fixed rate.
6) Company cannot accept deposits for a period more than ……..months
7) The company is liable to pay regular…………on the deposits at a fixed rate
8) Company cannot accept deposits for period less than ………….months
9) Unnecessary and irrelevant information in the letter should be…………………
10) Secretary conducts correspondence with the depositors as per the instructions of the………….
ANS. 1) Creditor 2) Secretary 3) Short 4) 6 months 5) Interest 6) 36 months 7)
Interest 8) 6 months 9) avoided 10) Board of |Directors

Q.11 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Depositor a) …………..
2) Return on Deposits b) ……………
3) ……………… c) Maximum period of Deposits
4) Minimum period of Deposits d) …………..
5) ……………… e) Evidence of Deposit
(Interest, Deposit Receipt., Creditors of the Company, 36 months, 6 months)

ANS 1) Creditors of the company 2) Interest 3) 36 months 4) 6 months 5) Deposit Receipt

Q.14 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) Who is Depositor?
Ans. The person who keeps his or her money for a fixed period of time with the company is known as ‘Depositor’.
*2) What is return on deposit?
Ans. Fixed rate of interest is provided as the return on deposit
*3) What is Interest warrant?
Ans. Interest warrant is an instrument of payment of interest
*4) What is renewal of deposit?
Ans. A process of continuing the deposit for an additional time period after maturity of investment of deposit is called
as ‘Renewal of Deposit’.
*5) Which document is enclosed along with the Renewal Letter?
Ans. Renewal Deposit Receipt is enclosed along with the Renewal Letter
*6) When will the company return the deposit?
Ans. The company will return the deposit amount at the time of maturity (after the expiry of fixed period).
*7) What is minimum and maximum period of deposit?
Ans. Deposit can be accepted for a minimum period of 6 months and maximum period of 36 months.
8) who gives instructions to the company secretary for corresponding with the depositors?
Ans. Board of Directors gives instructions to the company secretary for corresponding with the depositors
9) who’s consent is necessary for renewal of deposit?
Ans. Depositor’s consent is necessary for renewal of deposit
10) What is the time limit for sending deposit receipt to the depositor from the date of acceptance?
Ans. Deposit Receipt is sent to the depositor within 21 days from the date of acceptance of deposit.

Q.13 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) Depositors are owners of the company
Ans. Creditors
*2) Deposits are the internal source of financing
Ans. external
*3) Deposit is a long term source of capital
Ans. short
*4) Depositors are entitled to receive dividend
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 109 - STANDARD 12TH
Ans. interest
*5) Deposits can be accepted for a minimum period of 12 months
Ans. 6 months
*6) Deposit receipt can be issued within a period of 15 days of acceptance
Ans. 21 days

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Renewal of Deposit, Acceptance of Deposit, Deposit Receipt
Ans. Acceptance of Deposit, Deposit Receipt, Renewal of Deposit
*2) Payment of interest, Deposit Receipt, Acceptance of Deposit
Ans. Acceptance of Deposit, Deposit Receipt, Payment of Interest
*3)Legal provisions, Board Resolution, Acceptance of Deposit
Ans. Legal provisions, Board Resolution, Acceptance of Deposit
4) Appoint Banker, Credit Rating, Deposit insurance.
Ans. Appoint Banker, Credit Rating, Deposit insurance.
5) Return with depositors, Entries in register of Deposit, Issue of Deposit Receipt
Ans. Issue of Deposit Receipt, Entries in register of deposit, Return with depositors.

CHAPTER 9. DEPOSITORY SYSTEM

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) What is Depository System? Explain its advantages

Ans. MEANING OF DEPOSITORY SYSTEM
Under Depository System, securities are held in electronic form. The transfer and settlement of securities are
done electronically. The Depository System maintains accounts of the shareholder, enables transfer, collects
dividends, bonus shares, etc. on behalf of the shareholder. This system is also called as scripless trading system.
In India the Depository System was introduced by passing the Depository Act in 1996. Under this Act, a competitive
multi-depository system consisting of two depositories, viz. NSDL and CDSL was set up. It will be of interest to note
that the world’s first Depository was set up in 1947 in Germany.
BENEFITS / ADVANTAGES OF DEPOSITORY SYSTEM
A) To Investors :
1) Elimination of Risk : All risks associated with physical certificates like delays, lost, theft, mutilation, bad
deliveries, etc. are totally eliminated.
2) Safety : It is the most safe and secure way of holding securities. The entire system functions under the
Depository Act and is monitored by SEBI. e.g. The Investor can keep his account in a ‘Freeze / Lock' mode to avoid /
prevent unexpected debit or credit or both by giving instructions to the DP.
3) Easy Transfer of shares : a) Efforts in filling transfer forms and lodging the documents is eliminated.
b) Also the stamp duty levied on transfer of physical shares is not applicable.
c) Processing time in transfer of securities is reduced and neither the securities nor the cash is tied / held up for
unnecessarily long time.
4) Updates and Intimation : The investor is provided with the status of the holdings and transactions by DP
and occasionally by the Depository too.
5) Security against Loan : Dematerialised securities are preferred by banks and financial institutions as security
against loan.
6) No concept of ‘Lots’ : The system of odd and even lot stands abolished. The market lot is one share for
dematerialised securities.
7) Nomination Facility : Individual Investors can avail of nomination facility. This simplifies the process in
the event of the death of the investor.
8) Automatic Credit : The account of investor is automatically credited/debited in case of a change
initiated by the company which impacts the securities. This is called ‘Corporate Action’. Few examples which can be
termed as Corporate Action are : Payment of Dividend, Issue of Bonus Shares, Offering of Rights Shares, Early
Redemption of Debentures, Mergers and Acquisitions, etc.
B) To Companies :
1) Up-to-date Information : The up-to-date information about investors is provided by the depository.
2) Reduction in costs and efforts : Costs, efforts and time involved in printing and distribution of certificates in
cases of new issues, bonus, transfers, etc. is saved.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 110 - STANDARD 12TH
3) Better Investor - Company Relationships : The complaints arising out of loss of certificates, signature
differences, long lapses of time in executing requests, etc. is substantially reduced. It leads to better communication
with investors and increased goodwill for the company.
4) International Investment : Under Depository System, better and quicker services can be provided and
this attracts investments from abroad.

*II) Explain the constituents of Depository system

Ans. CONSTITUENTS OF DEPOSITORY SYSTEM
All operations under the Depository System is performed by Depository with the help of its constituents as
explained below :
CONSTITUENTS OF DEPOSITORY SYSTEM

The Depository The Depository Participant(DP) The Beneficial Owner The Issuer
(BO) Company
1) The Depository :
1) It is an organization like the Central Bank where securities are held in electronic form at the investor’s request.
2) It also provides different services related to different transactions in such securities.
3) It is responsible for safe-keeping of the investor's securities.
4) There is no direct access of investor with the Depository.
5) It works as a link between the company and investors.
2) Depository Participant (DP) :
1) It is the agent of Depository
2) DP is registered under the SEBI Act. It enjoys rights and obligations as specified under SEBI (Depository and
Participants) Regulations of 1996.
3) It is an intermediary appointed by Depository.
4) DP acts as a link between Depository and the investor.
5) It directly deals with customers. It sends statement of accounts periodically.
6) It functions like a securities bank.
7) It facilitates Demateralisation.
8) It credits securities in the event of Rights Issue, Bonus Issue, etc.
9) It handles instant transfers of pay-outs like dividend, interest, etc.
10) It settles trade electronically.
11) Following can work as DP’s :
a) Financial Institutions
b) Banks
c) Approved Foreign Banks
d) Custodians : Responsible for overseeing operations of assets/fund.
e) Stock Brokers
f) Clearing Corporation
g) NBFC (Non Banking Financial Company)
h) Registrar to an Issue or Share Transfer Agents
12) The DP maintains account of securities of each investor.
13) The DP has a unique number for identification.
3) The Beneficial Owner (BO) :
1) The BO is the investor of securities who has availed the services of Depository Participant.
2) BO is entitled to all rights, benefits and is subject to all liabilities with respect to securities held by Depository.
3) The BO can also be called as client of Depository and DP.
4) BO Client is required to open a Demat account with the DP for electronic holding of securities. BO has to pay
charges to the DP for availing the services of DP.
5) BO is given a unique account number in which securities are held.
4) The Issuer Company :
1) It means the company which has issued the securities which are dematerialized.
2) It must register with the Depository

*III) what is the procedure for Transfer of Securities under the Depository System in case of sale of shares
Ans. 1) In case of Sale of Shares :
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 111 - STANDARD 12TH
The Transferor i.e. investor has to inform his DP by issuing DIS (Delivery Instruction Slip) which is filled
and signed with the details of the security sold. At the end of the transaction the securities are debited in his Demat
Account. Transfer can be done as off market trade or as market trade.
a) Off Market Trade : Any trade settled directly between two parties on mutually agreed terms without the
involvement of clearing corporation, share broker or stock exchange is called as Off Market Trade.
Examples include legacy transfers, gifts, shifting of securities between a client and a sub broker, etc.

Depository

DP I DP II

Seller Buyer

Procedure :
1) Transferor i.e. the seller gives delivery instructions to his DP to move securities from transferor’s account to the
buyer’s account.
2) Transferee i.e. the buyer will receive the credit of the securities through his DP into the buyer’s account after
confirmation from Depository to the DP.
3) The funds / money will be paid by the buyer to the seller directly.
b) Market Trade :
Any trade which is settled through a clearing corporation is called “Market Trade’. These trades are done
through stock brokers on a stock exchange
Procedure :
1) Transferor gives delivery instruction to his DP. So securities move from Transferor’s account to the Transferor’s
Broker account.
2) Securities then are transferred from brokers account to clearing house of the stock exchange as per the delivery
instruction.
3) On the Pay-out-day, securities move from clearing house to the account of broker of the buyer.
4) After instructions and confirmation from Depository, securities move to the buyer’s account.

Q.2 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Explain the disadvantages of holding securities in physical mode. (OR)

What are the problems/disadvantages of holding securities in physical mode?
Ans. Securities means shares, debentures, bonds units of mutual funds securities are held in physical form or paper
form. Following are the problems/disadvantages of holding the securities in electronic form:
1) Risk : Certificates of papers can be lost, damaged, torn, stolen, misplaced during transit, etc.
2) Efforts in Duplicating : Obtaining duplicate certificates (if original certificate is lost) involves time, efforts
and money.
3) Delay in allotment of securities : Allotment of new securities takes longer time.
4) Delay in Transfer and Transmission of securities : More time is involved in transfer and transmission of
securities as it involves actual handling of physical certificates.
5) Risk of Bad Delivery : Delivering certificates which are torn, forged, etc. creates problems in buying and
selling of securities.

*II) Explain any four advantages(Benefits) of Depository system to Investor

Ans. Refer to Q. 1(I)

III) Explain the process of Dematerialisation?

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 112 - STANDARD 12TH
Ans.Dematerialization : (Demat) is a process whereby a client can get physical certificates converted
into electronic mode. The client has to surrender the certificates along with the Demat Request Form (DRF). The DP
forwards these to the Depository who in turn forwards it to the Issuer. After confirmation from Issuer, the Depository
will credit the securities in the Demat A/c with DP.
Following steps are involved in the process of Dematerialisation
1) Investor submits DRF in triplicate and certificates to DP
2) DP enters the Demat request in its system and sends it to Depository.
3) DP dispatches the physical certificates and copy of DRF to the Issuer.
4) The Issuer verifies and confirms to Depository about demating of the securities.
5) Depository records the request in the system and forwards it to the Issuer.
6) Depository credits the demated securities to beneficiary account (Demat A/c) of Investor. Depository intimates the
DP.
7) DP issues a statement of account to the Investor.

IV) Explain the functioning of Depository under the IPO Scheme?

Ans. IPO is the first sale of shares by privately owned company to the general public. A public company can raise
capital by making an appeal to general public to purchase shares of the company by issuing prospectus. The process
of IPO is as follows
In case of IPO (Initial Public Offer)
1) The investor (BO) submits his application for securities to the Issuer Company.
2) The Issuer Company verifies details of BO with the Depository.
3) After verification of BO's details, the Depository gives its report to the Issuer Company.
4) Issuer Company gives details of allotment of securities to Depository.
5) Depository credits the account of the BO.
6) Depository intimates the DP about crediting BO's account.
7) DP issues statement of account to BO.

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Electronic holding of securities is safer than physical holding.

Reasons : a) Electronic holding of securities means holding the securities in dematerialized form. B) Conversion
of physical certificate into electronic form is known as ‘Dematerialisation’ c) Holding of Securities in electronic
form eliminates huge volume of paperwork. D) Use of technology facilitates paperless trading which eliminates
storage and handling of certificates. It also helps in reducing cost and efforts. E) There is no risk of getting lost,
damaged, torn, stolen, misplaced during transit etc. F) Delay in transfer and allotment of securities to also
avoided.
So, electronic holding of securities is safer than physical holding.
*II) Depository provides easy and quicker transfer of shares
Reasons. 1) Depository system enables the swift transfer and transmission of shares and debentures. It just takes few
minutes to transfer securities in the name of the buyer. Bonus shares or right shares are immediately credited to the
account of shareholders. ii) It ensures liquidity by speedier settlement of transactions. He can encash securities
C) Hence it is also called as ‘Scripless Trading System”.
Depository system provides easy and quicker transfer of shares.

*III) Depository system results in reduced time, cost and efforts.

Reasons. i) Depository system enables the swift transfer and transmission of shares and debentures. It just takes few
minutes to transfer securities in the name of the buyer. Bonus shares or right shares are immediately credited to the
account of shareholders. ii) It ensures liquidity by speedier settlement of transactions. He can encash securities.
iii) The transaction cost is reduced. There is no stamp duty for transfer of shares in electronic form.
Depository system results in reduced time, cost and efforts.

*IV) Depository system is very similar to the Banking system

Reasons : a) Depository system is similar to the Banking system in many aspects. B) Depository keeps the
securities safe, just like the bank keeps the money of the account holder safe. C) In bank funds are held in
accounts having unique numbers. Similarly, securities are held in accounts having unique ID’s D) There is no
physical handling of money in bank. Similarly, there is no physical handling of securities by the depository. E)
Bank facilitates transfer of funds between accounts. Depository facilitates transfer of securities between accounts.
Thus, it is said that Deposito0ry system is very similar to the Banking system.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 113 - STANDARD 12TH
V) Depository system has some advantages of the Investor/
Reasons a) Depository system holds certificates of Investor in an electronic form. B) |Safety is ensured as the
entire system functions under the Depository Act and is monitored by SEBI c) The investor can even freeze his
account to avoid fraud. D) Investor can easily transfer the securities in electronic form. E) Investor receives
statement of account periodically which keeps him updated. F) Investor can raise easy loan against the
Dematrialised securities. G) Nominal facility is also available for investor H) Dividend, Bonus shares, Right
Issue, Redemption amount gets automatically credited to Investors account.
Thus, depository system has some advantages to the Invesotr.

VI) Investor can raise loan against dematerialized securities

Reasons : a) Investors can take a loan against securities that are held in their demat accounts. B) the time
required for the documentation process to take loans is less. C) In order to raise loan against dematerialized
securities, both the borrower and lender should have demat accounts with the same depository D) The Demat
accounts can be held with the same or different depository participant (DP)
Thus, investor can raise loan against dematerialized securities.

VII) Better and Quicker services of Depository system attracts investment from aboard
Reasons : a) Paperless trading is a boon for the company management b) Automatic and transparent screen
based trading in securities, shorter settlement periods has improved liquidity in investment in securities. C) The
transfer process under depository system is prompt and free from defects D) The company is able to know the
particulars of beneficial owners and their holding periodically.
Thus, better and quicker services of depository system attracts investment from abroad.

*VIII) DP is an important constituent of Depository System

Reasons: a) Depository Participant acts as a link between the Depository and the Investor. In other words, it is agent
of depository. B) DP is registered under the SEBI Act. It enjoys rights and obligations as specified under SEBI
Regulations of 1996. C) It is an intermediary appointed by Depository D) DP directly deals with customers
and send statement of accounts periodically e) The DP has a unique number for identification F) Banks,
Financial Institutions, Stock Brokers etc. can function as a Depository Participant
Thus, DP is an important constituent of Depository System

IX) It is necessary for the Beneficial Owner to open a DMAT account with the DP
Reasons a) Beneficial owner is the investor of the company. B) for holding the securities in electronic form, it is
necessary to open DEMAT account. C) DEMAT account can be opened with the help of DP d) The BO can
also be called as client of Depository and DP E) BO has to pay charges to the DP for availing the services of
DP F) BO is entitled to all rights, benefits and its subject to all liabilities with respect to securities. G) BO
is given a unique account number in which securities are held.
Thus, it is necessary for the BO to open DEMAT account with the DP

*X) Depository system allows both : Physical to Electronic and Electronic to Physical conversion
Reasons a) Under Depository system, Physical certificates can be converted into electronic known as
‘Dematerialisation’ b) similarly, conversion of Electronic securities into physical is known as ‘Rematerialisation’
c) due to Dematerialization transfer of securities takes place fast and transactions are also settled immediately. So, in
Rematerailsiation settlement of transaction in physical system takes more time. D) In Rematerialisation storing
and handling of physical certificates is more time consuming. So in dematerialization there is no handling of
certificates. E) There are chances of certificates getting lost, damaged, torn, stolen, misplaced during transit etc.
F) In this technological world, Demat Securities are more preferred over Rematerialized securities.
Thus, Depository system allows both : Physical to Electronic and Electronic to Physical conversion.

*XI) ISIN is necessary component of DEMAT

Ans. a) It is a code that uniquely identifies a specific securities issue. B) ISINs in any country are allotted by
that country’s NNA (National Numbering Agency) C) ISIN is a standard numbering system which is accepted
globally. D) 4) The International Organisation of Standardization (ISO) currently defines ISIN’s structure. E)
In India, issuing ISIN to securities is assigned by SEBI to NSDL (for demated shares) SEBI works as NNA in India.
F) For Government securities, allotment of ISIN is done by the RBI. G) ISIN consists of a 12 (Twelve) digit
alpha-numeric code which is divided in 3 (Three) parts. H) The company has to apply for ISIN for its
securities with documents like prospectus.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 114 - STANDARD 12TH
Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) What are the two ways of holding securities ?

Ans. Securities can be held in two modes – A) Physical B) Electronic / Dematerialized
A) Physical mode of holding securities : It means securities are held in the form of paper certificates. It has
following disadvantages :
1) Risk : Certificates of papers can be lost, damaged, torn, stolen, misplaced during transit, etc.
2) Efforts in Duplicating : Obtaining duplicate certificates (if original certificate is lost) involves time, efforts
and money.
3) Delay in allotment of securities : Allotment of new securities takes longer time.
4) Delay in Transfer and Transmission of securities : More time is involved in transfer and transmission of
securities as it involves actual handling of physical certificates.
5) Risk of Bad Delivery : Delivering certificates which are torn, forged, etc. creates problems in buying and
selling of securities.
B) Electronic / Dematerialized mode of holding securities : It means securities are held in
electronic or dematerialized form.
Under Depository System, securities are held in electronic form. The transfer and settlement of securities are
done electronically. The Depository System maintains accounts of the shareholder, enables transfer, collects
dividends, bonus shares, etc. on behalf of the shareholder. This system is also called as scripless trading system.
In India the Depository System was introduced by passing the Depository Act in 1996. Under this Act, a
competitive multi-depository system consisting of two depositories, viz. NSDL and CDSL was set up. It will be of
interest to note that the world’s first Depository was set up in 1947 in Germany.

*II) Explain Depository System. State its importances?

Ans. Under Depository System, securities are held in electronic form. The transfer and settlement of securities are
done electronically. The Depository System maintains accounts of the shareholder, enables transfer, collects
dividends, bonus shares, etc. on behalf of the shareholder. This system is also called as scripless trading system.
In India the Depository System was introduced by passing the Depository Act in 1996. Under this Act, a competitive
multi-depository system consisting of two depositories, viz. NSDL and CDSL was set up.
IMPORTANCE OF DEPOSITORY SYSTEM
a) Safe mode of transaction : The Depository eliminates the risk of bad deliveries, theft, damage, Misplacement of
certificate etc. Investors prefer to keep their investments in dematerialized form.
b) Minimum Paper Work : Under depository system the securities are transferred by means of book entries in the
ledger of depository system without any certificate in physical form. This eliminates the huge paper work involved.
c) Transparency : This system was adopted to bring complete transparency by eliminating any type of forgeries and
frauds
d) Quick transfer of securities : Depository system helps in quick and easy transfer of securities in a couple of days.
e) Less Administrative cost : Under this system, there is less cost involved as there is stamp duty required, no
postage charges, no registration charges etc.
f) easy liquidity : the depository system reduces the settlement time and the investor receives his dividend and other
payment right in time.
g) Complete record : The depository participant keeps the complete record of the investor’s account, and hence, the
demat holder gets complete record of his holdings.

*III) Explain any four advantages of Depository system to the company?

Ans. Refer To Q. 1(I)

*IV) Explain Depository as the constituent of Depository System?

Ans. 1) The Depository :
1) It is an organization like the Central Bank where securities are held in electronic form at the investor’s request.
2) It also provides different services related to different transactions in such securities.
3) It is responsible for safe-keeping of the investor's securities.
4) There is no direct access of investor with the Depository.
5) It works as a link between the company and investors.

*V) Explain Depository Participant (DP) as the constituent of Depository System?

Ans. Refer to Q. 3(VIII)

VI) Explain the various concepts/terms related to Depository System

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 115 - STANDARD 12TH
Ans. 1) Dematerialization : (Demat) is a process whereby a client can get physical certificates converted
into electronic mode. The client has to surrender the certificates along with the Demat Request Form (DRF). The DP
forwards these to the Depository who in turn forwards it to the Issuer. After confirmation from Issuer, the Depository
will credit the securities in the Demat A/c with DP.
2) Rematerialization : (Remat) is the process whereby a client can get his electronic holdings of securities
converted into physical certificates. The client has to give written request in the form of RRF (Remat Request Form)
to the DP. The DP forwards the RRF to Issuer and the Depository. The Issuer prints the certificates and sends them
to the client and simultaneously confirms the acceptance of Remat request to the Depository. The Depository via the
DP debits account of the client with those securities.
3) Fungibility (separate identity): In financial terms, fungibility means the state of being interchangeable. Some
financial assets are fungible while some are not fungible. e.g.
a) land is not fungible as every unit of land has its unique quality which adds to or reduces its value.
b) Currency note is fungible as there is no difference between two currency notes of the same value.
Similarly, securities issued by the same company of the same class have same value no matter who owns
them. The securities held in Demat/Electronic form are fungible. They are interchangeable, substitutable and cannot
be distinguished from each other. Securities bear no notable features like distinctive number, certificate number or
folio number.
4) International Securities Identification Number (ISIN)
1) It is a code that uniquely identifies a specific securities issue.
2) ISINs in any country are allotted by that country’s NNA (National Numbering Agency)
3) ISIN is a standard numbering system which is accepted globally.
4) The International Organisation of Standardization (ISO) currently defines ISIN’s structure.
5) In India, issuing ISIN to securities is assigned by SEBI to NSDL (for demated shares) SEBI works as NNA in
India.
6) For Government securities, allotment of ISIN is done by the RBI.
7) ISIN consists of a 12 (Twelve) digit alpha-numeric code which is divided in 3 (Three) parts.
8) The company has to apply for ISIN for its securities with documents like prospectus.

VII) How many depositories are established in India, Under the Depository Act 1996
Ans. The Depository Act of 1996 paved the way for the establishment of depositories in India. There are two
Depositories which exist in India viz : 1) NSDL 2) CDSL.
A) NSDL : National Security Depository Limited :
1) It is the first and the largest depository in India established in November, 1996.
2) It is promoted by IDBI (Industrial Development Bank of India), Unit Trust of India (UTI) and National Stock
Exchange (NSE).
3) NSDL has its headquarters in Mumbai.
4) NSDL is a public limited company registered under the Companies Act.
5) NSDL provides various services to investors and other players in the capital market like Stock Exchanges, Banks,
Issuers, Clearing Members, etc.
6) It renders services like account maintenance, dematerialization and rematerialization, settlement of trades through
market transfers and off market transfer, nomination, transmission, distribution of non-cash corporate actions,
dividend distributions, facility of freezing or locking of investors’ accounts, Investor grievances, etc
B) CDSL : The Central Depository Services Limited :
1) CDSL began its operations in February 1999.
2) It was promoted by Bombay Stock Exchange jointly with several banks.
i) It has its headquarters in Mumbai.
ii) CDSL has a wide DP network and offers the Demat services similar to NSDL
across the country
Both these institutions have played a tremendous role in success of Depository System in India.

Q.5 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) Dematerialization and Rematerialization.

Points Dematerialization Rematerialization
1. Meaning Process of converting Physical certificates It is the process of conversion of electronic
of securities into electronic form. form of securities into physical form.
2. Conversion Here, the paper form of securities is Here, the electronic records are converted into
converted in to digitally/ electronically physical/paper form securities.
held securities.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 116 - STANDARD 12TH
3. Use of Form It uses 'DRF' : Viz. 'Dematerialization It uses 'RRF' : viz Rematerialization Request
Request Form' from Investor to the DP. Form’ from Investor to the DP.
4. Sequence This is an initial process. It is a primary This is a reverse process. It is a secondary and
and Principal function of the depository. supporting function of depository. Already
demated securities are remated.
5. Demated securities have no distinctive Remated securities will have certificate and
Identification numbers. They are fungible. distinctive numbers as issued by company.
of Securities
6. Securities Depository is the custodian of securities The issuing company is the record keeping
Maintenance and records. authority. Securities are maintained by the
Authority investor.
7. Difficulty of Demat is an easy process. Also Remat is not only a time consuming but also a
Process its not a time consuming process. complex process.
8. Time It is easy and time saving. It is complex and time consuming
consumed

II) Depository and Depository Participant

Points Depository Depository participant
1. Meaning A depository is an entity which helps the A Depository Participant is the link between
investor to buy or sell securities online companies and investor
2. Types There are two depositories functional in Various depository participants are linked to
India. NSDL and CDSL NSDL and CDSL
3. Use of Form A Depository may be organizations, banks A Depository Participant can be a bank,
or institutions financial institutions, a broker
4. Registered Depositories must be registered as a Depository Participant should be registered
company under the Company Act and under the SEBI Act
obtain a certificate of Commencement of
Business from SEBI

III) NSDL and CDSL

Points NSDL CDSL
1. Meaning NSDL means National Securities CDSL means Central Depository Services India
Depository Ltd. Ltd.
2. Formed NSDL formed in 1996 CDSL formed in 1999
3. Works for NSDL mainly works for National Stock CDSL mainly works for Bombay stock
Exchange (NSE) Exchange (BSE)
4. |Registered Depositories must be registered as a Depository Participant should be registered
company under the Company Act and under the SEBI Act
obtain a certificate of Commencement of
Business from SEBI

Q.6 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*1) Mr. Z holds 100 shares of Peculiar Co. Ltd. in Physical mode and wishes to convert the same in electronic
mode :
A) Mr. Z holds a Saving Bank Account with CFDH Bank Ltd. Can he deposit his shares in this account for
demat ?
Ans. No, He cannot because it is saving bank Account
B) What type of account is needed for the same ?
Ans. For holding electronic securities, he needs to open a DMAT account with the Depository Participant (DP)
C) Is it the RBI which will be the custodian of shares of Mr. Z after demating ?
Ans. No. RBI will not be custodian, After demating concerned ‘Depository’ (NSDL/CDSL) will be the custodian of
the shares of Mr. Z

*2) Mr. R holds 100 shares of Peculiar Co. Ltd. in Demat mode :

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 117 - STANDARD 12TH
He wants to transfer one share each to his wife, daughter and son. Can he do so ?
Ans. Yes, Mr. R can do so, as under dematerialized securities market lot is of one shares
B)Does he need to submit DRF or DIS if he wants to transfer his shares ?
Ans. He needs to submit DIS (Delivery Instruction Slip) if he wants to transfer his shares.
C) Can he nominate his wife in his demat account ?
Ans. Yes, Mr. R can nominate his wife for DEMAT account.

*3) Mrs. Z wishes to open a Demat account in her name :

A) Can she open the account going to Mumbai office of NSDL ?
Ans. No, Mrs. Z cannot to directly to Mumbai office of NDSL
B) Is she required to pay for opening of account and its maintenance ?
Ans. Yes, she is required to pay for opening of account and its maintenance
C)_ Does she have to send the shares to respective company for demating ?
Ans. Yes, she has to send her original share certificate through Depository Participant to the company

*4) Mr. L wants to demat his 25 shares of Peculiar Co. Ltd. bearing certificate No. 100 and distinctive No. 76-
100.
a) Which form is he required to fill as a written request to the DP ?
Ans. Mr. L is required to fill Demat Request form (DRF) as a written request to DP
b)Does he have to fill instrument of transfer if he wishes to transfer the same after demat ?
Ans. No, he need to fill instrument of transfer after opening Demat account
C) Does he have to quote certificate no. and distinctive no. if he wishes to transfer hisshares after it is in demat
form ?\
Ans. No. Mr. L need not quote certificate number and distinctive number if he wishes to transfer his shares after it is
in DEMAT form

*5) Mr. S holds 50 shares of Peculiar Co. Ltd. in demat form. The company has declared a dividend of ` 5/- per
share and Bonus of 1:1 to its shareholders.
A)How will Mr. S get his dividend ?
Ans. Mr. S will get his dividend credited directly to his dmat account
B) Will he get Bonus share in Physical or demat ?
Ans. He will get Bonus Share in his demat account
C) Who is entitled to dividend and Bonus : Mr. S or the depository ? (NSDL in this case)
Ans. Mr. S is entitled to dividend and Bonus through the depository services.

6) KPCL Bank is a well established banking Institution, Now it got registered as a Depository Participant
A) Under which Act KPCL got Registered As DP?
Ans. Under SEBI Act KPCL got registered as DP
B) KPCL Bank as an intermediary will be link between whom?
Ans. KPCL Bank as an intermediary will be link between Depository and The investor
C) Name the two depositories in India, of whom KPCL Bank can be a DP(Agent)
And NSDL OR CDSL

7) Mr. K wants to rematerialize his 50 shares of PQR Ltd.

A) Which form he is required to fill as a written request to DP?
Ans. He is required to fill Remat Request form (RRF)
B) Does he have to fill instrument of transfer if he wishes to transfer the same after remat?
Ans. Yes, He needs to fill instrument of transfer if he wishes to tjrsansfer the same after REMAT
c) Does he have to quote certificate number and distinctive number if he wishes to transfer his shares after it is
in REMAT form?
Ans. Yes, he has to quote certificate number and distinctive number if he wishes to transfer his shares after it is in
REMAT form
\
8) Mariam is a broker working with ABACUS company.
A) Who is the depositor?
Ans. ABACUS company is depositor
B) Who is depository Participant?
Ans. Mariam is a depository participant
C) Mariam should be registered with whom?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 118 - STANDARD 12TH
Ans. Mariam being the broker must be registered with SEBI and comply with SEBI NORMS

Q.7 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Depository System

Ans. A) Under Depository System, securities are held in electronic form. B) The transfer and settlement of
securities are done electronically. C) The Depository System maintains accounts of the shareholder, enables
transfer, collects dividends, bonus shares, etc. on behalf of the shareholder. D) This system is also called as
scripless trading system. E) It keeps the securities safe. It offers scope for paperless trading by using the Internet.

*II) Depository
Ans. A) It is an organization like the Central Bank where securities are held in electronic form at the investor’s
request. B) It also provides different services related to different transactions in such securities. C) It is
responsible for safe-keeping of the investor's securities. D) There is no direct access of investor with the
Depository. E) It works as a link between the company and investors.

*III) ) Depository Participant (DP) :

Ans. A) It is the agent of Depository. DP is registered under the SEBI Act. It enjoys rights and obligations as
specified under SEBI (Depository and Participants) Regulations of 1996. B) It is an intermediary appointed by
Depository. C) DP acts as a link between Depository and the investor. It directly deals with customers. It sends
statement of accounts periodically. It functions like a securities bank. D) It facilitates Demateralisation. It credits
securities in the event of Rights Issue, Bonus Issue, etc. It handles instant transfers of pay-outs like dividend, interest,
etc. E)It settles trade electronically.

IV) Beneficial Owner (BO)

Ans. A) The BO is the investor of securities who has availed the services of Depository Participant. B) BO is
entitled to all rights, benefits and is subject to all liabilities with respect to securities held by Depository. C) The
BO can also be called as client of Depository and DP.

*V) Dematerialization :
Ans A) (Demat) is a process whereby a client can get physical certificates converted into electronic mode.
B) The client has to surrender the certificates along with the Demat Request Form (DRF). C) The DP forwards
these to the Depository who in turn forwards it to the Issuer. D) After confirmation from Issuer, the Depository
will credit the securities in the Demat A/c with DP.

*VI) Rematerialization :
Ans. A) (Remat) is the process whereby a client can get his electronic holdings of securities converted into physical
certificates. B) The client has to give written request in the form of RRF (Remat Request Form) to the DP. The DP
forwards the RRF to Issuer and the Depository. C) The Issuer prints the certificates and sends them to the client
and simultaneously confirms the acceptance of Remat request to the Depository. D) The Depository via the DP
debits account of the client with those securities.

*VII) Fungibility (separate identity):

Ans. A)In financial terms, fungibility means the state of being interchangeable. Some financial assets are fungible
while some are not fungible. e.g. a) land is not fungible as every unit of land has its unique quality which adds to or
reduces its value. Currency note is fungible as there is no difference between two currency notes of the same value.
B) Similarly, securities issued by the same company of the same class have same value no matter who owns
them. C) The securities held in Demat/Electronic form are fungible. They are interchangeable, substitutable and
cannot be distinguished from each other. D) Securities bear no notable features like distinctive number,
certificate number or folio number.

*VIII) International Securities Identification Number (ISIN)

Ans. A) It is a code that uniquely identifies a specific securities issue. ISINs in any country are allotted by that
country’s NNA (National Numbering Agency) B) ISIN is a standard numbering system which is accepted
globally. The International Organisation of Standardization (ISO) currently defines ISIN’s structure. C) In India,
issuing ISIN to securities is assigned by SEBI to NSDL (for demated shares) SEBI works as NNA in India. D)
For Government securities, allotment of ISIN is done by the RBI. E) ISIN consists of a 12 (Twelve) digit
alpha-numeric code which is divided in 3 (Three) parts. The company has to apply for ISIN for its securities
with documents like prospectus.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 119 - STANDARD 12TH

*IX) a) Off Market Trade :

Ans. A) Any trade settled directly between two parties on mutually agreed terms without the involvement of
clearing corporation, share broker or stock exchange is called as Off Market Trade. B)Examples include
legacy transfers, gifts, shifting of securities between a client and a sub broker, etc.

*X) Market Trade :

Ans.Any trade which is settled through a clearing corporation is called “Market Trade’. These trades are done through
stock brokers on a stock exchange

Q.8 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Bad Delivery a) 1956
2) Depository act b) A 12 Digit Number /code
3) ISIN c) Connects Government and Bank
4) Depository Participant d) Second Depository in India
5) CDSL e) The issuer company
6) Depository f) Problem faced in Physical mode
7) Beneficial Owner g) A 10 digit number or code
h) Connect depository and investor
i) First depository in the world
j) Custodian of securities in electronic form
k) Problem faced in electronic mode
l) 1996
m) Government Organisation
n) The investor
Ans. (1-f),(2-l),(3-b),(4-h),(5-d),(6-j), (7-n)

*2) A GROUP B GROUP

1) Dematerialisation a) State of being interchangeable
2) Rematerialisation b) Register with Depository
3) Fungibility c) Demat Request Form
4) Issuer d) Transferor informs DP
5) Sale of Shares e) Transferee intimates the DP
6) Purchase of shares f) Remat Request Form
g) Broker
Ans. (1-c),(2-f),(3-a),(4-b),(5-d),(6-e)

Q.9 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1) In physical mode, securities are held in……….. form.
a) Paper b) Dematerialization c) Electronic
*2) Risk of losing certificates exists in………. mode.
a) Physical b) Dematerialised c) Digital
*3) In Depository System, securities are held in……… form.
a) Scrip based b) electronic c) Physical
*4) .................................. is the institute which facilitates electronic holding of securities.
a) Depository participant b) Issuer c) Depository
*5) There is no payment of ................. when securities are demated.
a) Octroi b) Wealth Tax c) Stamp Duty
*6. Depository Act was passed in .......................................
a) 1919 b) 1996 c) 1999
*7) India has a ....................... depository system.
a) sole b) multi c) single
*8) ....................... is a constituent of depository system.
a) Government b) Issuer c) Trust
*9) ....................... is the oldest depository in India.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 120 - STANDARD 12TH
a) Dow Jones b) NSDL c) CDSL
*10) Demat account is opened by ....................... .
a) Beneficial Owner b) CDSL c) SEBI
*11) Demated shares are....................... .
a) Non-transferable b) Fungible c) Bearer
*12) ....................... is a unique code given to a security.
a) IBM b) BBM C) ISIN
*13) In India ISIN for corporate securities is allotted by .......................
a) NSDL b) Central Govt . c) State Govt.
*14) ....................... has to apply for ISIN.
a) Company b) Depository participant c) Depositors
*15) ....................... has to pay charges to maintain Demat Account.
a) Investor b) Issuer c) Depository
*16) NSDL is promoted by .......................
a) NSE b) BSE c) FTSE
*17) CDSL is promoted by .......................
a) NSE b) BSE c) FTSE
18) Dematerialisation removes the problem of …………handling of securities.
a) Physical b) Public c) Social
19) The National Securities Depository Limited (NSDL) was established in the year………….
a) 1995 b) 1996 c) 1997
20) The process of converting shares from the electronic form into physical form is called……….
a) Rematerialisation b) Dematerialisation C) Depository
21) An agent of depository is ………….
a) Depository Participant (DP) b) Depository Officer (DO) c) Beneficial Owner (BO)
22) An intermediary between the investors and depository is………
a) Depository participant b) SEBI c) Chief Executive Officer (CEO)
23) An investor has to open…………with the Depository Participant for handling shares in electronic form
a) Demat A/c b) securities c) Depository a/c
24) Depository Participant is an agent of…………..
a) Investor b) Securities and Exchange Board of India c) Depository
25) ………….is a process by which share certificate of investors are converted into electronic form
a) Dematerialisation b) Rematerialisation c) Depository
26) Dematerialsiation is a process in which share in physical form is converted into………….
a) Electronic form b) Paper form c) Computer form
27) The provisions regarding dematerialization of securities are made in…………..
a) Law b) Memorandum of articles c) Articles of association
28) Demat account holder can…………..any person of his choice.
a) Elect b) Nominate c) Choose
29) All depository participants are to be registered with………..
a) Registrar of companies b) Securities and exchange Board of India c) Depository
30) An Institution which records share certificate in the electronic form is known as………..
a) Stock exchange b) Depository c) depository Participant

Q.10 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
*1) This mode of holding securities may result in loss and theft of certificates.
*2) The organization which holds the securities in electronic mode.
*3) This system eliminates storing of certificates.
*4) This system allows faster and easier transfer of securities.
*5) The oldest Depository of India.
*6) The country where depository system started for the first time.
*7) The registered owner of securities.
8) The year in which Depository act was passed
9) The largest institution in India which gives Depository services
10) The year in which National Security Depository Limited (NSDL) started functioning
11) Investor is whose name demat account is opened.
*12) The Agent of the Depository.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 121 - STANDARD 12TH
*13) This process converts securities into electronic form from physical form.
*14) This process converts securities into physical form from electronic form.
*15) This means securities are without distinctive identity number.
*16) This is the unique code for security given in depository system.
17) An account to be opened by an investor for handling shares in electronic form.

ANS. 1) Physical mode of securities 2) Depository 3) Depository system 4) depository system

5) National Security Depository Limited. (NSDL) 6) Germany 7) Beneficial Owner 8) 1996 9)
NSDL 10) 1996 11) Beneficial owner 12) Depository Participant 13) Dematerialisation 14)
Rematerialisation 15) Fungibility 16) International Securities Identification Number (ISIN) 17)
Demat A/c

Q.11 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Physical mode of holding securities is risky.
*2) Allotment of securities take longer time when in physical mode.
*3) Transfer of securities is easier in electronic mode.
*4) Bad delivery is likely in Depository System.
*5) Depository system began in the USA for the first time in the world.
*6) India has a multi Depository System.
*7) Depository system is very similar to banking system.
8) CDSL is the oldest Depository in India
9) An investor can keep his Securities with his Saving Account
*10) DP is a constituent of Depository System.
*11) DP is an agent of Depository.
12) ASIN number is given to the Depository Participant
*13) A Bank can work as a DP.
*14) DRF is required for conversion from physical to electronic.
*15) ISIN is a unique code given to the specific securities.
16) Dealing in Demated securities is a time consuming process
17) Settlement of cash is easy in case of rematerialized Securities
18) For Demateralised Securities Company has to be registered with the Depository

ANS.
TRUE : 1, 2, 3, 6, 7, 10, 11, 13, 14, 15, 18
FALSE : 4, 5, 8, 9, 12, 16, 17,

Q.12 FIND THE ODD ONE(ONE MARKS EACH)

*1) Elimination of storage of Certificates, Theft of Certificates, Torn Certificates.
*2) NSDL, CDSL, NBFC
*3) Depository, DP, RBI.
*4) DP, BO, State Government.
*5) Issuer, BO, Central Government.
*6) DRF, RRF, PPF
7) Physical, Electronic, Capital
8) Off Market Trade, Market Trade, Clearing House

Q.13 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Central location for keeping securities in demated form is ......................... .
*2) Freezing of debit/credit of securities is possible in ......................... .
*3) First Depository of the world started in the year ......................... .
*4) The Indian Depository Act was passed in the year .,............ .
*5) Link between Depository and Investor is ......................... .
*6) Account of securities of the Investors is maintained by ......................... .

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 122 - STANDARD 12TH
*7) The process which converts physical securities in electronic form is ......................... .
*8) The process which converts digital securities in physical form is ......................... .
*9) The Issuer company must register with ......................... .
*10) The unique code identifying a security is ......................... .
*11) The first depository of India is ......................... .
12) An agent of Depository is called as………
13) An investor who open an account with the Depository Participant is known as………….
14) an account through which the Securities are held in electronic form is called as…….
15) For converting physical securities into electronic securities an investor has to submit……….
16) For converting electronic securities into physical certificates an investor has to submit…………..

ANS. 1) Depository 2) Dematerialised Securities 3) 1947 4) 1996 5) Depository

Participant 6) Depository Participant 7) Dematerialisation 8) Rematerialisation 9) Depository
10) International Securities Identification Number (ISIN) 11) NSDL (National security Depository
Limited) 12) Depository Participant 13) Beneficial Owner 14) Demat A/c 15) Demat
Request Form (DRF) 16) Remat Request Form (RRF)

Q.14 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Dematerialization a) …………..
2) …………… b) DP
3) First Depository of world c) …………..
4) CDSL d) …………..
(1999, Agent of Depository, Germany, Physical to electronic)
ANS 1) Physical to electronic 2) Agent of Depository 3) Germany 4) 1999

*2) A GROUP B GROUP

1) First Depository in India a) …………..
2) …………… b) Rematerialisation
3) Fungibility c) …………..
4) ……… d) ISIN
(12 Digital code, NSDL, Electronic to Physical, No distinctive number)
ANS 1) NSDL 2) Electronic to Physical 3) No Distinctive number 4) 12 digital code

Q.15 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) What is Depository System?
Ans. Depository system is a system where Securities are held in electronic form
*2) Give examples of action termed as corporate action?
Ans. Payment of Dividend, issue of Bonus Shares, offering of right shares, Early Redemption of Debentures, Mergers
and Acquisitons etc.
*3) When was Depository Act passed in India?
Ans. Depository Act was passed in India in the year 1996
*4) What is a DP?
Ans. DP means Depository participant, who is an agent of Depository.
*5) What is Dematerialisation?
Ans. Dematerialisation is the process of converting physical securities into electronic
*6) what is rematerialisation?
Ans. Rematerialisation is the process of converting electronic Securities into physical.
*7) What is ISIN?
Ans. ISIN is the unique code given to the specific securities of the company. ISIN refers to ‘International Securities
Identification Number’.
*8) Name the Depositories in India?
Ans. i) National Security Depository Limited (NSDL) ii) Central Depository Services Limited (CDSL)
9) Who is Beneficial Owner?
Ans. The investor in whose name Securities are credited to his Demat account, is the ‘Beneficial Owner’
10) What are the two modes of holding securitieis?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 123 - STANDARD 12TH
Ans. The two modes of holding securities are a) Physical b) Electronic
11) When and where was the world’s first depository system set up?
Ans. The world’s first depository system was set up in Germany in 1947
12) What is Corporate Action?
Ans. When the investor accounts get automatically credited or debited for securities in case of change initiated by
company is called Corporate Action
13) Who is the issuer?
Ans. Issuer is the company which issue securities in the dematerialized form.
14) What is the full form of IPO?
Ans. IPO means Initial Public Offer

Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) Electronic mode of holding securities is risky.
Ans. Physical
*2) Allotment and Transfer of securities is time consuming in electronic mode
Ans. Physical mode.
*3) Banking system leads to a scrip less capital market.
Ans. Depository
*4) Storage of Certificates is not required in Physical mode of holding
Ans. Electronic
*5)India has a single Depository system.
Ans. Multi
*6) Depository Participant in India has to register under the partnership act.
Ans. Depository ACt
*7) Demat accounts are opened and maintained by the Depository.
Ans. Depository Participant
*8) Securities are fungible in Physical mode.
Ans. electronic
*9) ISIN is a code given to a company.
Ans. securities of a company
*10) ISIN of Indian Government securities is issued by NSDL.
Ans. RBI

Q.16 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) a) Gets Statement of Accounts, Open Demat Account, Submit DRF
Ans. Submit DRF, Open Demat Account, Gets Statement of Account
*2) Investor (BO) submits application for securities to issuer company., Depository intimates the DP about
crediting BO's Account. Issuer company gives details of allotment to Depository.
Ans. Investor (BO) submits application for securities to issuer company., Issuer company gives details of
allotment to Depository, Depository intimates the DP about crediting BO's Account

CHAPTER 10. CORRESPONDENCE WITH DEPOSITORS

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) Define Dividend and explain its features

Ans. DIVIDEND – MEANING
The term dividend is derived from Latin word ‘Dividendum’ which means ‘that which is to be divided’.
It is that part of the profits of the company which is distributed amongst its shareholders. Dividend is ‘a share
in distributable profits of the company to which the shareholder is entitled when it is formally declared by the
company.
Definition :
The Institute of Chartered Accountants of India has defined Dividend as, “a distribution to shareholders out
of profits or reserves available for this purpose.”
The Supreme Court has defined it as, “In case of going-concern, it means portion of profits of a company,
which is allotted to the holders of shares in a company.”
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 124 - STANDARD 12TH
FEATURES OF DIVIDEND
1) It is the portion of profits of the company paid to its shareholders.
2) It is payable out of the profits of the company.
3) Dividend is an unconditional payment made by the company.
4) Company can pay dividend only to the shareholders viz. (1) Equity (2) Preference.
5) If the company has issued equity shares with differential rights as to dividend, the terms of issue of such shares
will govern rights of shareholders about receiving the dividend.
6) Dividend cannot be declared out of capital.
7) Dividend can be declared only on recommendation of the Board of Directors.
8) Dividend as recommended by Board of Directors is approved and declared by a resolution passed at the 9) Annual
General Meeting by the shareholders.
9) Dividend for any previous year cannot be declared once that year’s Annual Account has been approved in the
AGM.
10) Dividend once approved and declared by shareholders creates a debt. It cannot be revoked.
11) Dividend includes Interim Dividend.
12) Dividend must be paid in cash and not in kind.
13) Dividend is to be paid on paid-up value of shares.
14) Dividend cannot be paid on calls paid in advance.

*II) Discuss legal provisions for declaration of dividend

Ans. Legal Provisions for declaration of Dividend :
1) Board Meeting : Dividend can be declared only on recommendation of Board of Directors. Board Meeting
should be called to pass resolution about :
a) Rate of Dividend and amount of Dividend to be paid
b) Book closure date for dividend
c) Date of Annual General Meeting.
d) Bank with which a separate account should be opened to remit the dividend amount.
2) Shareholders Approval :
a) Dividend is approved by shareholders by passing an Ordinary Resolution at the Annual General Meeting.
b) Shareholders can declare a lower rate of dividend than what is recommended by the Board but not higher than that.
c) Once the dividend is declared at the General meeting it cannot be revoked. Company is not permitted to declare it
second time in that year.
3) Separate Bank Account : The company must deposit the dividend amount in a separate bank account
opened in a scheduled bank called as Dividend Account within 5 (Five) days of its declaration.
 Listed company : Where a company’s shares are listed on the Stock Exchanges, additional requirements with
respect to Listings agreements must be followed like.
a) Notify stock exchange where company’s securities are listed at least 2(two) days in advance of the date of meeting
of the Board at which recommendation of final dividend is to be considered.
b) Intimate Stock Exchange immediately about declaration of dividend after the Board Meeting.
c) Give notice of Book closure to the stock exchange at least 7(seven) working days before the closure.
d) Close the Register of members and the Transfer Register.
e) It must use electronic mode of payment such as Electronic Clearing Services (ECS) or National Electronic Fund
Transfer (NEFT); as approved by the Reserve Bank of India (RBI)
f) Listed company has to express the dividend on per share basis only.
4) Prohibition to Pay Dividend :
a) A company which has failed to repay deposit or any interest on deposit cannot declare any dividend on its equity
shares.
b) No dividend can be declared if company has defaulted on :
1) Redemption of Debentures or payment of interest, Redemption of Preference shares, payment of interest to
financial institution, etc.

*III) Discuss legal provisions for Payment of dividend

Ans. Legal Provisions for payment of Dividend :
1) Dividend must be paid in cash and not in kind.
2) Dividend may be paid by cheque or warrant or by any electronic mode to the shareholder.
3) Joint holding of shares : Dividend warrant should be sent to the registered address of the first named joint
shareholder as per the Register of Members or to such a person at his address as the shareholder or joint shareholders
have given to the company in writing.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 125 - STANDARD 12TH
4) Time limit within which Dividend is to be paid. Company must pay dividend within 30 (Thirty) days from the date
of its declaration.
5) Dividend is payable only to the registered shareholders of the company.
Preference shareholders are entitled to the dividend before it is paid to the equity shareholders as per the terms
of issue of the preference shares. Equity shareholders will get dividend from residual profits. i.e. after paying to
preference shareholders and arrears of dividend on cumulative preference shares.
6) If shares are held in electronic form, dividend will be paid to the beneficial owner as per the statements furnished
by the Depository. If shares are held in Physical form, dividend is paid to the shareholders whose names appear in
Company’s Register of Members.
7) Default : Default in paying dividend in the given time results in -
a) Punishment to every Director of the company.
b) Company will be liable to pay simple interest at the rate of 12% p.a. during the period when the default continues.
 If company fails to comply with any of the requirement of this section, the company and directors shall be
liable to pay fine.

*IIII) Explain the rules pertaining to the Unpaid/Unclaimed Account

Ans. UNPAID AND UNCLAIMED DIVIDEND
The dividend declared by company but has not been paid by it or claimed by a shareholder within 30 days of
its declaration is termed as Unpaid and Unclaimed Dividend.
Following rules govern the Unpaid/Unclaimed Dividend :
Unpaid Dividend Account (Unpaid / Unclaimed Dividend)
a) Total amount of dividend which remains unpaid/unclaimed should be transferred to ‘Unpaid Dividend Account’
opened in a scheduled Bank by the company.
b) This transfer should be within 7 (seven) days of the end of 30 days within which payment was to be made. In other
words this transfer should happen within 37 (Thirty seven) days from the declaration of dividend.
c) Within 90 (Ninety) days of transfer of amount in the ‘Unpaid Dividend Account’, the company is required to put
on its website or any other website as approved by the Central Government, a statement which shows names, last
known addresses and unpaid amount payable to each shareholder.
d) Any claimant to the Unpaid Dividend Account may apply to the company for the payment of money claimed.
e) Any amount in the unpaid Dividend Account of a company which remains unpaid/ unclaimed for a period of 7
(seven) years from the date of such a transfer shall be, transferred by the company to ‘Investors Education and
Protection Fund’ (IEPF).
f) The claimant of money will have to follow the procedures and submit necessary documents to get claim from IEPF
along with a statement in the prescribed form which gives details of such transfers

*V) What is Interim Dividend? Explain its features.

Ans. INTERIM DIVIDEND - MEANING :
Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend.
Interim dividend is paid in the middle of the accounting year i.e. before the finalisation of annual accounts for the
year. Opinion of the company’s Auditors should be taken before declaring Interim Dividend
Features of Interim Dividend :
1) The Board of Directors has the power to declare Interim Dividend.
2) Interim Dividend is only a payment on account of the whole dividend for the year.
3) Company should provide depreciation for the entire year and not proportionately for a part of the year before
declaring Interim Dividend.
4) Interim dividend cannot be paid out of any reserves.
5) Articles of Association of the company must authorize the Board of Directors to declare Interim Dividend.
6) The Board Meeting has to pass a resolution for declaring the Interim Dividend.
7) The amount to be given as Interim Dividend must be credited in a separate Bank account in a scheduled bank
within 5 (five) days of its declaration.
8) Interim Dividend should be paid within 30 days of its declaration.
9) Unpaid / Unclaimed Interim Dividend should be transferred to ‘Unpaid Dividend Account within 7 days of the
expiry of 30 days of declaration i.e. 37 days of its declaration.
10) Any amount remaining unpaid/unclaimed in the ‘Unpaid Dividend A/c’ for 7 (seven) years should be transferred
to IEPF.

Q.2 ATTEMPT THE FOLLOWING. (FOUR MARKS EACH)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 126 - STANDARD 12TH
*I) Explain the legal provisions for the sources of dividend
Ans. The term dividend is derived from Latin word ‘Dividendum’ which means ‘that which is to be divided’.
It is that part of the profits of the company which is distributed amongst its shareholders. Dividend is ‘a share in
distributable profits of the company to which the shareholder is entitled when it is formally declared by the company
Legal provisions on sources of Dividend
a) Company may declare and pay dividend for any financial year out of the following:
1) Current Profits i.e. profits of the company of that year arrived at, after providing for depreciation and transfer to
Reserves.
2) Out of profits of the company of any previous financial year, after providing for depreciation.
3) Money provided by the Central or State Government to pay dividend.
b) Dividend can be paid out of Capital Profits :
On fulfiling these condition :
i) Capital profits are realised in cash
ii) Articles of Association of the company permits such a distribution
iii) It remains as profits after revaluation of all Assets and Liabilities.
c) Dividend cannot be paid out of Capital.
d) Dividend can be paid out of free reserves of company.

II) Explain the legal provisions of listed company regarding the declaration of dividend.
Ans.  Listed company :
Where a company’s shares are listed on the Stock Exchanges, additional requirements with respect to
Listings agreements must be followed like.
a) Notify stock exchange where company’s securities are listed at least 2(two) days in advance of the date of meeting
of the Board at which recommendation of final dividend is to be considered.
b) Intimate Stock Exchange immediately about declaration of dividend after the Board Meeting.
c) Give notice of Book closure to the stock exchange at least 7(seven) working days before the closure.
d) Close the Register of members and the Transfer Register.
e) It must use electronic mode of payment such as Electronic Clearing Services (ECS) or National Electronic Fund
Transfer (NEFT); as approved by the Reserve Bank of India (RBI)
f) Listed company has to express the dividend on per share basis only

*III) What is Interest? Explain its features.

Ans. Meaning
In financial terms, it is a payment made for using money of another. i.e. Borrower takes money from the
lender.
So interest is the cost of renting money, for the borrower and it is the income from lending money for the
lender.
Features
1) Interest is the price paid for the productive services rendered by capital.
2) It is directly related to risk. Higher the risk, higher is the interest.
3) Rate of Interest is expressed as annual percentage of Principal.
4) Rate of interest is determined by various factors like money supply, fiscal policy, volume of borrowings, rate of
inflation etc.
5) Interest is a charge against the profit of the company. Even if company makes no profit, interest should be paid.
6) It is payable at a fixed and generally pre-determined rate.
Company has to pay interest if it has borrowed money from creditors like Debentures holders, Depositors, Bond
holders, etc.

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Dividend is paid out of profits of the company

Ans. a) Dividend is the portion of profits of the company paid to its shareholders b) It is payable out of profits of
the company c) Dividend can be paid out of capital profits on fulfilling these conditions.
i) Capital profits area realized in cash ii) Articles of association of the company permits such as a distribution
iii) It remains as profits after revaluation of all assets and liabilities
so, dividend is paid out of profits of the company

II) Dividend cannot be paid on calls i.e. in advance

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 127 - STANDARD 12TH
Ans. a) Dividend is an unconditional payment made out of company’s profit b) It is paid out of current profits or
profits of the previous financial year. C) Dividend once approved and declared by shareholders cannot be
cancelled d) once the annual accounts of previous year has been approved in AGM the dividend of the previous
year cannot be declared.
SO, dividend cannot be paid on calls i.e. in advance

III) Dividend can be declared even if a company suffers loss in that particular period
Ans. a) Dividend is paid out of company’s profit i.e. out of current profits, profit of any previous year, out of capital
profits and money provided by central or state government b) Every year the company transfer part of its profit
to different reserves c) Dividend may be declared from capital profit i.e. selling company’s assets d)
Company can utilize accumulated profit and reserves in absence of profit. E) Government also provides funds to
company under certain schemes.
So, dividend can be declared, even if a company suffers loss in that particular period.

*IV) Listed company has to follow additional guidelines on dividend matters

Ans. a) Notify stock exchange where company’s securities are listed at least two days in advance of the date of
meeting of the Board at which recommendation of final dividend is to be considered. B) Intimate stock
Exchange immediately about declaration of dividend after the Board Meeting c) Give notice of book closure to
the stock exchange at least 7(seven) working days before the closure d) Close of Register of members and the
transfer Register. E) It must use electronic mode of payment such as Electronic Clearance services (ECS) or
National Electronic Fund Transfer (NEFT) as approved by the Reserve Bank of India. (RBI) f) Listed company
has to express the dividend on per share basis only

*V) Equity shareholders get last priority in receiving dividend

Ans. a) Dividend is the portion of the company paid to its shareholders b) Dividend is payable only to the
registered shareholders of the company c) Preference shareholders are entitled to the dividend before it is paid to
the equity shareholders. D) The equity shares do not enjoy preference for dividend. E) They do not have
priority for payment of capital at the time of liquidation f) Equity shareholders will get dividend from residual
profit i.e. after paying to preference shareholders and arrears of dividend on cumulative preference shares. G)
The equity shares get last priority in dividend and thus are the residual claimants
So, equity shareholders get last priority in receiving dividend.

*VI) Unpaid dividend cannot be used by the company

Ans. a) The dividend declared by company but has not been paid to or claimed by a shareholder within 30 days of its
declaration is termed as unpaid dividend. B) Total amount of dividend which remains unpaid should be
transferred to ‘Unpaid Dividend Account’ c) Any amount in the Unpaid Dividend account of a company which
remains unpaid or unclaimed for a period of 7 years will be transferred to ‘Investors Education and Protection Fund.’
D) Company cannot use unpaid dividend. Only claimant of money can claim for its by following certain procedure.
So, unpaid dividend cannot be used by the company.
*VII) Interim dividend cannot be paid out of free reserves
Ans. a) Dividend declared by the Board of Directors between two Annual General Meetings is called Interim
Dividend. B) Interim Dividend shall not be declared out of free reserves. C) In the event of a loss or
inadequacy of profits during a financial year, no interim dividend shall be declared. D) The declaration of an
interim dividend does not create a debt against a company e) The board of directors can cancel an interim
dividend after declaring it.
So, interim dividend cannot be paid out of reserves

VIII) The rate of interim dividend is less than final dividend

Ans. a) final Dividend is declared at the end of the financial year whereas Interim Dividend is declared between two
annual general meeting. B) Interim dividend is declared when the company makes good profit in the first half of
the financial year. C) Interim dividend is declared twice in a year. Hence the rate of dividend is lower than final
dividend.
So, the rate of interim dividend is lesser than final dividend.

*IX) Approval of members is not needed for Interim Dividend.

Ans. a) Dividend declared by the Board of Directors between two Annual General Meetings is called Interim
Dividend. B) It is paid in the middle of the accounting year. C) It is declared out of profits of the current
account year. D) It is declared before preparation of final accounts of the company e) The Board of Directors
has the power to declare Interim Dividend F) ‘Articles of Association’ of the company must authorize the Board

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 128 - STANDARD 12TH
of Directors to declare interim dividend. G) The Board Meeting has to pass a resolution for declaring the Interim
Dividend.
So, approval of members is not needed for interim dividend.

*X) Interest is a liability/Obligation of the company (OR) Interest is paid to the creditor if the company
Ans. a) Interest is a payment made for using anothers money. So, it is cost of renting money for the borrower and
it is the income from lending money for the lender. B) Company has to pay interest, if it has borrowed money
from creditors like Debenture holders, Depositors, Bond Holder etc. c) Interest is liability of the company as it is
a payment made for using money from the lender d) Interest is a charge against the profit of the company e)
Even if the company makes no profit, it has to pay interest to borrowers.
So interest is a liability or obligation for the company. Interest is paid to the creditor of the company.

*XI) Payment of Interest does not require passing of resolution at any meeting. (OR) Resolution need not be
passed for payment of interest.
Ans. a) Interest is the liability of the company b) It is to be paid to the creditors of the company c) It is paid
every year irrespective of the profits earned by the company every year. It is a charge on profit. D) The rate of
interest is fixed and pre-determined.
It means payment of interest does not require passing of resolution at any meeting. Resolution need not be
passed for payment of interest.

*XII) Annual General Meeting is crucial for Final Dividend. (OR) Final Dividend is declared only after the
accounts are prepared and finalized
Ans. a) Final Dividend is that dividend which is declared and paid after closing of the financial year. B) It is
decided and recommended by the Board of Directors c) The rate of final dividend is declared by the
shareholders in the AGM d) It is declared only after the account of the year are prepared and finalized.
So, AGM is crucial for Final Dividend. Final Dividend is declared only after the accounts are prepared and
finalized.
E) Final dividend is declared from different sources, and its declaration does not need the authorization of articles.
So AGM is crucial for Final Dividend. Final Dividend is declared only after the accounts are prepared and
finalized.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) Discuss any four features of dividend

Ans. Refer to Q 1(I)

II) Explain different modes of payment of dividend.

Ans. Dividend payable in cash may be paid by cheque or warrant or by electronic mode to the entitled shareholder.
Let’s discuss the different ways in which dividend can be paid by company
1) Dividend Warrant : It is a cheque sent by a company to a shareholder for payment of dividend to the
registered address of the shareholder.
2) Dividend Mandate : A shareholder may wish to get dividend credited directly in the bank account.
Shareholder is required to send a request to the company in the prescribed form called. ‘Dividend Mandate’. Dividend
mandate authorizes the company to pay dividend directly to shareholder’s bankers
3) Electronic Mode : Company can use electronic mode to pay dividends to its shareholders.
a) A listed company has to mandatorily use RBI approved electronic mode of payment such as ECS. (Electronic
Clearing Services), NEFT (National Electronic Fund Transfer).
b) Make arrangements with bank and in collaboration with other banks, if required, to pay the Dividend Warrants at
par

*III) State any four points to be kept in mind by a listed company with respect to dividend
Ans. Refer to Q. 2(II)

*IV) Explain the features of interest

Ans. Refer to Q 2(III)

Q.5 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) 1) Interim Dividend and Final Dividend

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 129 - STANDARD 12TH
Points Interim Dividend Final Dividend
1. Meaning It is declared and paid between two AGMs It is declared and paid after the close of the
of an accounting year. financial year.
2. Who It is decided and declared by the Board of It is decided and recommended by the Board of
Declares Directors in the Board Meeting. Directors. It is declared by the shareholders in
the AGM.
3. It can be declared only if Articles of It’s declaration does not need authorization by
Authorization Association permits its declaration. Articles of Association.
4. When It is declared between two Annual General It is declared at the Annual General Meeting of
Declared Meetings of the company. the company
5. Rate of Rate of Interim dividend is Rate of final dividend is always higher than
Dividend lower than final dividend. Interim Dividend.
6. Source It is declared out of profits of the current It is declared from different sources like;
accounting year. current year’s profits, free reserves, capital
profits, Money provided by Govt. for dividend,
etc.
7. Accounting It is declared before preparation of the It is declared only after the accounts of the year
Aspect final accounts of the company are prepared and finalized.
8. Legal It is declared on the assumption of making as final dividend is declared after the
Aspects similar profit in the second half of the year. conclusions of financial year and the
It is illegal and dangerous. In such case, ascertainment of net disposable profit on the
directors will be personally liable. basis of audited accounts and statements. It is
always safe and legal.
9. A resolution passed at the board meeting The board cannot cancel once it is approved by
Cancellation may be cancelled by the board the shareholders.
10.Debt Declaration of interim dividend does not Declaration of final dividend creates a debt on
create a debt on the company the company

2) Dividend and Interest

Points Dividend Interest
1. Meaning Dividend is the return payable to the It is the return payable to the creditors of the
shareholders of the company for their company viz. Debenture holder / Deposit
investment in the share capital. holders for the loan given by them to the
company.
2. Given to It is paid to the member i.e. the owners of It is paid to the creditor of the
whom the company. company.
3. Obligation It is to be paid only when company has It is not linked to the profits of the company.
made profits. Therefore no obligation / Payment of interest is an obligation and is to be
compulsion to pay dividend. paid by the company compulsorily.
4. When It is payable when a company earns It is payable every year irrespective of the
Payable sufficient profit in a year after fulfilling all profits of the company.
obligations.
5. Rate It is paid at a fluctuating rate to the Rate of interest is fixed and pre- determined at
equity shareholders since it is linked to the the time of issue of the security.
profits of company.
6. Resolution Payment of Final Dividend requires a Payment of interest does not require passing of
Board resolution and an ordinary a resolution at any meeting.
resolution at the AGM while Interim
Dividend can be paid by passing only a
Board Resolution.
7. Accounting Dividend is an appropriation of profit. Interest is a charge on profit.
Treatment /
Aspect

Q.6 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 130 - STANDARD 12TH
*I) LMN Co Limited decides to declare dividend for the financial year 2018-19 in which it has earned profits
less than their expectations.
A) Is Board right in recommending a dividend of Rs. 5/- per share out of free reserves ?
Ans. Yes, Board is right in recommending, a dividend of Rs. 5/- per share out of free reserves, as dividend can be paid
out of free reserves
B) Can Board declare the dividend though it is not approved by AGM ?
Ans. No Board cannot declare the divided if it is not approved by AGM as dividend should be approved by
shareholders by passing an ordinary resolution in AGM
C) Can the Board give dividend in the form of gifts ?
Ans. No Board cannot give dividend in the form of gifts. It must be paid in cash not in kind.

*II) ABC Co. Ltd. decides to pay Interim Dividend

a) Can it be paid out of free reserves ?
Ans. No, Interim Dividend cannot be paid out of free reserves
B) Is the Board right in declaring the same at the Board Meeting ?
Ans. Yes. Board is right in declaring same at the Board Meeting as it has power to declare Interim Dividend
C) Can the company distribute the same within 30 days of its declaration ?
And.
Ans. Yes, after declaration, Interim Dividend should be paid within 30 days of tis declaration

*III) RAJ Company limited decides to pay Interim Dividend

A) Is the Board justified to decide Interim Dividend of ` 5/per share even though profits till date are insufficient
?
Ans. Interim dividend is paid out of profits between two annual general meetings. It cannot be paid out of any
reserves. So it is not justified.
B) Can the Board declare it out of Free Reserves ?
And. No Board Cannot declare Interim Dividend out of free reserves
C) Can the Board declare it out of Capital ?
Ans. No board cannot declare out of capital

*IV) DIAMOND Co. Ltd. is considering to declare Interim Dividend.

A) In how many days of declaration it should transfer the funds to Dividend Account ?
Ans. interim dividend must be transferred to Dividend account within 5 days of its declaration
B) In how many days it must pay it to shareholders?
Ans. Interim Dividend should be paid within 30 days of its declaration to shareholders
C) In how many days of declaration it must transfer the funds to the Unpaid Dividend A/c?
Ans. Unpaid/Unclaimed Interim Dividend should be transferred to ‘Unpaid Dividend account’ within 7 dyas of the
expiry of 30 days of declaration i.e. 37 days of declaration

*V) The Board of Directors of STAR Co. Ltd. which is a listed company recommends a dividend of ` 15/- per
share to be paid in cash.
a) Is it justified to pay the dividend firstly to its Preference Shareholders and then after to Equity
Shareholders?
Ans. Yes, because preference shares are entitled to the dividend before it is paid to the equity shareholder. Equity
shareholders get dividend from residual profits. i.e. after paying to preference shareholders
B) Is the AGM required to approve the same?
Ans. Yes for declaration of final dividend Approval of AGM is must
C) Can the company pay dividend in cash?
Ans. Yes, company pay dividend in cash and not in kind.

*VI) GOLD Co. Ltd. declares a dividend of ` 10/- per share for F.Y. 2018-19.
A) Is company under default, if dividend was not paid within 30 days of its declaration ?
Ans. Yes, company is to default as time limit within which company must pay dividend after declaration in 30 days
B) Is company right in transferring the unpaid dividend to its Debenture Reserve Account ?
Ans. No, company has to transfer total amount of dividend which remains unpaid or unclaimed to the ;Unpaid
Dividend Account’
C) Does the company have to transfer the amount of unpaid dividend to IEPF after 30 days ?
Ans. No, any amount in the unpaid dividend account of a company which remains unpaid or unclaimed for a period of
7 years from the date of such a transfer, should be transferred to IEPF i.e. Investors Education and Protection Fund

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 131 - STANDARD 12TH
VII) VMCL co. ltd. Decides to pay final dividend.
A) Is the rate of final dividend lower than interim dividend which is already paid by them?
Ans. No, as the interim dividend is a part of first half of the profit, its rate is lower than final dividend.
B) who has the authority to declare final dividend?
Ans. Board of Directors has the authority to declare final dividend
C) Can it be paid out of capital profit?
Ans. Yes, final dividend can be paid out of capital profits, if it fulfills certain statutory conditions. For e.g. capital
profits should be released in cash.

VIII) Mr. Dutch has given loan to VMCL Co.

A) what is Mr. Dutch to VMCL Co.?
Ans. Mr. Dutch is the creditor for the VMCL co.
B) What will Mr. Dutch receive in return?
Ans. Mr. Dutch will receive interest in return
C) Will Mr. Dutch receive interest even if the company is in loss?
Ans. Yes, Mr. Dutch will receive interest even if the company incurs loss because it is not linked with profits or loss
of the company

IX) Mr. B is the shareholder who wants to get dividend credited directly in his bank account
A) What form is Mr. B required to fill to get dividend credited directly into this account?
Ans. ‘Dividend Mandate’ is the prescribed form required to fill to get dividend credited directly into this account.
B) If Mr. B has sold his partial shares, will he receive the dividend?
Ans. No, If Mr. B has sold his partial shares, he will be receiving dividend on the remaining shares.
C) what is the benefit of Dividend Mandate?
Ans. The benefit of dividend mandate is it saves time, cost and efforts.

Q.7 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Profit
Ans. Profit is the financial gain from business activity minus expenses. Profit is the income remaining after deducting
total costs from total revenue. It is also called as financial gain. Profit is the difference between revenues and the
expenses for a given period. It is the tool for measuring the success of the business. Without profit, company cannot
survive in the market.

*II) Dividend
Ans. The term dividend is derived from Latin word ‘Dividendum’ which means ‘that which is to be divided’.
It is that part of the profits of the company which is distributed amongst its shareholders. Dividend is ‘a share
in distributable profits of the company to which the shareholder is entitled when it is formally declared by the
company.

*III) Interest
Ans. Interest is the cost of borrowing money typically expressed as an annual percentage of loan. The money people
earn on their savings is called interest. Interest is paid to the lender by the borrower, in case of a loan or from the
financial institution to the depositor, in the case of savings account. In financial terms, it is a payment made for using
money of another. i.e. borrower taken money from the lender. Interest is the cost of renting money for the borrower
and it is the income from lending money for the lender.

*IV) Final Dividend

Ans. ‘Final dividend’ is the dividend declared at the ‘Annual General Meeting’. It is also termed as ‘annual dividend’.
The rate of final dividend is recommended by the Board of Directors. While determining the rate of final
dividend, board considers about
a) amount of income tax to be paid b) amount to be transferred to different reserves c) provision for depreciation
d) total amount of net profit.
After considering whether provision is made from total profit for above factors, board of directors
recommends the rate of dividend. It is the statutory right of the Board

*V) Interim Dividend

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 132 - STANDARD 12TH
Ans. Dividend declared by the Board of Directors between two Annual General Meetings is called Interim Dividend.
Interim dividend is paid in the middle of the accounting year i.e. before the finalisation of annual accounts for the
year. Opinion of the company’s Auditors should be taken before declaring Interim Dividend

*VI) Unpaid Dividend

Ans. Dividend declared by company but neither paid to nor claimed by a shareholder within 30 days of its declaration
is termed as Unpaid or Unclaimed dividend.

*VII) Unpaid Dividend Account

Ans. Dividend declared by the company but neither paid to nor claimed by shareholder is called as Unpaid or
Unclaimed Dividend. This unpaid or unclaimed dividend should be transferred to the Unpaid Or Unclaimed Account
within the 30 days of its declaration. This ‘Unpaid Dividend Account’ is opened in a scheduled Bank by the
Company.

*VIII) Dividend Mandate

Ans. Dividend is paid by different modes of payment like cash, cheque or warrant or by electronic mode. It can
also be paid by using Dividend Mandate.
If the shareholder wishes to get dividend credited directly in the Bank Account he is required to send a request
in a prescribed form which is called ‘Dividend Mandate’. Dividend mandate authorizes the company to pay dividend
directly to shareholders bankers.

*IX) IEPF
Ans. ) Any amount in the unpaid Dividend Account of a company which remains unpaid/ unclaimed for a period of 7
(seven) years from the date of such a transfer shall be, transferred by the company to ‘Investors Education and
Protection Fund’ (IEPF).
f) The claimant of money will have to follow the procedures and submit necessary documents to get claim from IEPF
along with a statement in the prescribed form which gives details of such transfers

*X) Rate of Dividend

Ans. The return which shareholder receives on his investment from the company is called dividend. The dividend is
always declared by the company on the face value of a share irrespective of its market value. The rate of dividend is
expressed as a percentage of the face value of a share per annum.

XI) Dividend Warrant

Ans. It is an instrument send by the company to the shareholder. It is a document that reflects shareholder is entitled
to receive dividend or not. It contains the name and address of the register red shareholder. In other words, it is order
of payment in which dividend is paid.

Q.8 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1. Dividend is paid to ..................................
a) Shareholder b) Debentureholder c) Depositor
*2) .................................. is profit shared by company with a shareholder.
a) Interest b) Rent c) Dividend
*3) Dividend is recommended by .................................. .
a) Managing Director b) Secretary c) Board of Directors
*4) Interim Dividend is declared by .................................. .
a) Board of Directors b) Debentureholders c) Depositors
*5) Final Dividend is declared by .................................. .
a) Board of Directors b) Shareholders c) Depositors
*6). Dividend cannot be declared out of .................................. .
a) Capital b) Profit c) Reserves
*7) Dividend amount should be transferred in a separate Bank Account within .................... days of its declaration.
a) 5 b) 15 c) 50
*8) Dividend should be paid within .................................. days of its declaration.
a) 3 b) 13 c) 30
*9) ...................... holders get dividend from residual profits.
a) Equity share b) Preference share c) Debenture
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 133 - STANDARD 12TH
*10) Dividend is paid first to…………..shareholders.
a) Equity b) Preference c) Deferred
*11) ...................... warrant is a cheque containing dividend amount sent by company to the shareholders.
a) Dividend b) Share c) Interest
*12) IEPF is created by ...................... where unpaid dividend is transferred by company.
a) Central Govt. b) Company c) Shareholders
*13) Payment of ...................... Dividend must be authorised by the Articles of Association.
A) Interim b) Final c) Bonus
*14) ..................... is a return paid to creditors by the company.
A) Dividend b) Interest c) Rent
*15) ..................... is not linked to profits of the company.
A) Dividend b) Interest c) Bonus
16) Dividend is a part of……………. Distributed to the shareholders
A) Profit b) Reserve c) Unpaid Capital
17) Dividend is an income on investment in…………………
a) Debentures b) Loan c) Shares
18) Unpaid or Unclaimed dividend shall be transferred to ‘Investors Education and Protection Fund’ on expiry
of…………years.
a) Three b) seven c) Five
19) The dividend declared between two Annual General Meeting is known as …………….dividend
a) Interim b) Final c) |Annual
20) The……………recommends the final dividend.
a) shareholders b) Board of Directors c) Promoters
21) ………………is the dividend declared at the Annual General Meeting
a) Interim Dividend b) Final Dividend c) Unpaid Dividend

Q.9 MATCH THE PAIR(ONE MARKS EACH)

*1) A GROUP B GROUP
1) Dividend a) Equity shareholders
2) Interest b) Appropriation of profit
3) Interim Dividend c) Recommendation of secretary
4) Final Dividend d) Registrar of company
5) Fluctuating Rate of Dividend e) Obligation to pay
f) decided and declared by Board of Directors
g) Decided by Board and Declared by members
h) Decided by President of India
i) Company not allowed to Pay
j) Declared by Government of India
Ans. (1-b),(2-e),(3-f),(4-g),(5-a),

*2) A GROUP B GROUP

1) Dividend a) Inform stock exchange about dividend declaration
2) Interest b) Creditors
3) IEPF c) Registered Shareholders
4) Unpaid Dividend Account d) Balance of Unpaid Dividend Transferred
5) Listed company e) Unregistered company
f) Non listed company
g) Unpaid / unclaimed dividend
h) Balance of unpaid bonus transferred here
i) Must inform government about dividend declaration
j) General Public
Ans. (1-c),(2-b),(3-d),(4-g),(5-a),

3) A GROUP B GROUP
1) Dividend coupon a) Return of investment of shareholders
2) Dividend Warrant b) Declared at Annual General Meeting
3) Dividend c) Share certificate holder
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 134 - STANDARD 12TH
4) Final Dividend d) Share warrant holder
5) Interim Dividend e) Return on debentures
f) Declared between two Annual General Meeting
g) Bonus Shares
h) Declared at extra ordinary general meeting
i) Special resolution
j) Debenture certificate holder
Ans. (1-d),(2-c),(3-a),(4-b),(5-f)

4) A GROUP B GROUP
1) Interim Dividend a) Cannot be paid in kind
2) Dividend account b) Cannot be paid out of reserves
3) Declaration of Dividend c) Owners of the company
4) Interest d) Board of Directors
5) Listed company e) Schedule Bank
f) Dividend as per share basis only
g) IEPF
h) Debenture holders
i) Rate of dividend is high
j) Shareholder’s approval
Ans. (1-b),(2-e),(3-j),(4-h),(5-f)

Q.10 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
*1) The return on investment paid to the shareholders of the company.
*2) The meeting where final dividend is declared.
*3) The company which has to intimate stock exchange about declaration of dividend.
*4) The shareholders who get dividend at a fixed rate.
*5) The shareholders who get dividend at a fluctuating rate.
*6) Request by shareholder in prescribed form for payment of dividend into shareholders bank amount.
*7) Number of days within which payment of dividend be completed by company, after its declaration.
*8) Dividend declared between two AGMs.
*9) Dividend decided and declared by the Board.
*10) The return paid to the creditors by the company.
11) A dividend remaining unpaid to shareholders even after the expiry of 30 days of its declaration
12) People who recommend the rate of dividend
ANS. 1) Dividend 2) AGM (Annual General Meeting) 3) Listed company 4) Preference
5) Equity 6) Dividend Mandate 7) 30 days 8) Interim Dividend 9) Interim Dividend 10)
Interest 11) Unpaid Dividend 12) Board of Directors

Q.11 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) Dividend is paid to registered shareholders of the company.
*2) Dividend is decided by the Board.
*3) Dividend is decided by the shareholders.
*4) Dividend once declared cannot be revoked.
*5) Dividend cannot be paid out of capital.
*6) Shareholders decide about the rate and amount of profit to be given as dividend.
*7) All categories of shareholders get a fixed rate dividend.
*8) IEPF is the fund created by company.
*9) Interest is a liability for company.
*10) Interest is paid to shareholders of company.
11) Final Dividend is paid on the actual profits arrived after the closure of books of accounts
12) Interim Dividend is declared before preparation of the final accounts of the company
13) Higher the risk, lower is the interest.
14) Auditor’s opinion should be taken before declaring Interim Dividend
15) ‘Unpaid Dividend Account’ is opened in a private Bank by the company

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 135 - STANDARD 12TH
ANS.
TRUE : 1, 2, 4, 5, 9, 11, 12, 14,
FALSE : 3, 6, 7, 8, 10, 13, 15

Q.12 FIND THE ODD ONE(ONE MARKS EACH)

*1) Final Dividend, Interim Dividend, Interest.
*2) Out of Capital, Out of free reserve, Out of money given by government.
*3) Dividend Account, Dividend Mandate, unpaid/unclaimed dividend Account.
*4) Dividend warrant, Dividend Mandate, Cheque.
5) Equity shares, Preference Shares, Deposit holders
6) Interest, Dividend warrant, Dividend Mandate
7) Unpaid/Unclaimed Account, IEPF, Deposits
8) ECS, NEFT, Cash

Q.13 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Word dividend is derived from Latin term .......................... .
*2) Dividend is paid to.......................... .
*3) Dividend can be declared only on recommendation of .......................... .
*4) Dividend must be paid in.......................... .
*5) The meeting at which final dividend is approved is .......................... .
*6) Dividend cannot be paid out of .......................... .
*7) Interim dividend is decided and declared by .......................... .
*8) Predecided and a fixed rate of dividend is paid to .......................... .
*9) Payment of dividend must be completed within .......................... .
*10) Payment of Interim Dividend needs to be authorized by .......................... .
*11) The obligatory payment made by company to its creditors is called as .......................... .
12) Dividend can be paid out of……………
13) Dividend which is approved by shareholders should pass……..
14) The dividend declared by company but not been paid or claimed by shareholders is called………
15) Rate of interest is expressed as annual percentage of………………..
16) …………….is paid to the creditors of the company
17) Any amount in ‘Unpaid Dividend A/c’ for 7 years should be transferred to………………..

ANS. 1) Dividendum 2) Registered shareholders 3) Board of Directors 4) cash 5)

Annual General Meeting 6) Capital 7) Board of Directors 8) Preference shareholder 9) 30
days 10) Articles of Association 11) Interest 12) Capital profits 13) Ordinary
resolution 14) Unpaid/Unclaimed Dividend 15) Principal 16) IEPF

Q.14 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Dividendum a) …………..
2) Interest b) ………….
3) …………. c) final Dividend
4) …………. d) Interim Dividend
5) Government Fund e) …………
( Latin Term, Creditors, at AGM, At Board Meeting, IEPF )
ANS 1) At Board Meeting 2) Latin Term 3) IEPF 4) At AGM 5) Creditors

*2) A GROUP B GROUP

1) Preference shares a) …………..
2) Equity shares b) ………….
3) Deposit holders c) ………….
4) …………. d) Payment of Dividend
5) …………… e) Dividend declared but not paid / claimed

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 136 - STANDARD 12TH
( Fixed Rate Dividend, Dividend at a fluctuating Rate, Interest, Within 30 days, Unpaid/Unclaimed Dividend )
ANS 1) Unpaid/Unclaimed Dividend 2) Within 30 days 3) Interest 4) Fixed Rate of Dividend
5) Dividend at a fluctuating Rate

Q.15 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) What is Dividend?
Ans. Dividend is a share in distributable profits of the company to which the shareholder in entitled when formality
declared by the company
*2) Who has right to recommend dividend?
Ans. Board of Directors has the right to recommend.
*3) What is final Dividend?
Ans. Final Dividend is that dividend which is declared and paid after the close of the financial year.
*4) what is Interim Dividend?
Ans. Interim Dividend is that dividend which is declared and paid between two AGM’s of an accounting year.
*5) who declares Interim Dividend?
Ans. Board of Directors declares Interim Dividend
*6) Which shares get dividend at a fixed rate?
Ans. Preference shares get dividend at a fixed rate.
*7) Which shares get dividend at a fluctuating rate?
Ans..Equity shares get dividend at a fluctuating rate.
*8) At which meeting Interim Dividend is decided and declared?
Ans. Interim Dividend is decided and declared in Board Meeting
*9) what is interest?
Ans. Interest is the price paid for the productive services rendered by Capital
*10) State the time within which unpaid dividend be transferred to unpaid dividend account?
Ans. Unpaid dividend should be transferred within 7 days of the end of 30 days within which payment has to be made
11) Who declares final dividend?
Ans. Final dividend is declared by shareholders.
12) Which are the two types of dividend?
Ans. The two types of dividend are a) Interim and b) Final Dividend
13) Name the electronic mode of payment of dividend?
Ans. Electronic mode of payment of dividend is ECS (Electronic Clearing System), NEFT ( National Electronic Fund
|Transfer)
14) what is the full form of IEPF?
Ans. Investors Education and Protection Fund
Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING
SENTENCES(ONE MARKS EACH)
*1) Dividend is paid to creditors.
Ans. shareholders
*2) Interest is paid to shareholders.
Ans. creditors
3) Final Dividend is paid between two AGMs.
Ans. Interim
*4) Special Resolution must be passed to declare Final Dividend.
Ans. Ordinary resolution
*5) Dividend must be paid within 60 days of its declaration.
Ans. 30 days
*6) The Dividend to be paid should be transferred to Dividend A/c within 30 days of its declaration.
Ans. 5 days
*7) Dividend is an obligation to be paid by a company every year.
Ans. Interest
*8) Preference shareholders are given the last priority in payment of dividend.
Ans. Equity
*9) Preference shareholders get dividend from residual profits.
Ans. Equity
*10) Dividend is payable every year irrespective of profits made by company.
Ans. Interest
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 137 - STANDARD 12TH
11) Dividend is payable in Kind
Ans. cash
12) Unclaimed/Unpaid dividend should be transferred to Dividend Account
Ans. Unpaid Dividend Account
13) Interim Dividend rate is higher than Final Dividend
Ans. lower
14) Rate of Dividend is expressed as annual percentage of principal
Ans. interest
15) Dividend cannot be declared out of reserves
Ans. Capital
16) Dividend is declared at Board Meeting
Ans. Dividend is declared at the Annual General Meeting
17) Dividend Mandate should be sent to the registered address of the shareholder
Ans Warrant
18) Interest is a charge on capital profit
Ans charge on profits
19) Interest is paid to the owners of the company
Ans. Dividend

Q.17 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

*1) Recommendation of Dividend, Checking sufficiency of profits, Board Meeting
Ans. Checking sufficiency of profits, Board Meeting, Recommendation of Dividend

*2) Transfer to Dividend Account, Transfer to IEPF, Transfer to Unpaid Dividend Account
Ans. Transfer to Dividend Account, Transfer to Unpaid Dividend Account, Transfer to IEPF

*3) Closure of Register of Members, Intimate Stock Exchange of Board Meeting, Intimate Stock Exchange of
declaration of dividend.
Ans. Intimate Stock Exchange of Board Meeting, Intimate Stock exchange of Declaration of dividend, Closure of
Register of Members.

*4) Decision on Rate of Dividend, Transfer to IEPF, Payment of Dividend.

Ans. Decision of rate of Dividend, Payment of Dividend, Transfer to IEPF

*5) Payment of Interim Dividend, Board meeting deciding and declaring Interim Dividend, Authorization of
Articles of Association.
Ans. Authorisation of Articles of Association, Board Meeting deciding and declaring Interim Dividend, Payment of
Interim Dividend

6) Declaration of Dividend, Source of Dividend, Payment of Dividend

Ans. Source of dividend, Declaration of Dividend, Payment of Dividend

7) Payment of dividend to shareholder’s Banker, Dividend Mandate, Company authorizes

Ans. Dividend Mandate, Company authorizes, Payment of dividend to shareholder’s banker

CHAPTER 11. FINANCIAL MARKET

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) What is Financial Market? Explain function of Financial Market

Ans. FINANCIAL MARKET – MEANING
A Financial Market is a market where Financial assets i.e. Financial instruments are exchanged or bought and
sold. Financial market helps in mobilisation of savings and convert it into investments. Thus financial market acts as
an intermediary between investors and borrowers.
Financial instruments are documents in the form of legal agreement between two parties having a monetary
value. It represents a financial asset to one party and a financial liability to another party e.g. securities like shares,
bonds, debentures, derivatives, commercial papers etc. are financial instruments.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 138 - STANDARD 12TH
Financial Markets attracts funds from investors and channelises them to corporations. The term Financial
Market represents the market which raises finance for long term via the Capital Market and short term via - the Money
Market
FUNCTIONS OF FINANCIAL MARKET
1) Transfer of Resources : Financial Market facilitate the transfer of real economic resources from lenders to
ultimate users.
2) Productive usage : Financial Market allows productive use of the funds. In the hands of the investors
their excess funds would have remained idle. Borrowers use these Funds for productive purposes.
3) Enhancing Income : Financial Market allows lenders to earn interest or dividend on their surplus funds,
thus leading to the enhancement of the individual and the national income.
4) Capital Formation : Financial Market provides a channel through which savings flow to industrial and
commercial organisations in the form of capital. This leads to capital formation.
5) Price determination : The financial instruments traded in a financial market get their prices from the
mechanism of demand and supply. The investors are the suppliers of the funds and the corporates are the users. The
interaction between the two and other market factors will help to determine the prices.
6) Sale Mechanism : Financial Market provides a mechanism for selling of a financial asset by an investor so
as to offer the benefit of marketability and liquidity of such assets.
7) Mobilizing Funds : Idle funds in the hands of the investors can be productively used by corporates.
Investors that have savings must be linked with corporates that require investment. So financial market enables the
investors to invest their saving according to their choices and risk assessment. This will utilize idle funds and the
economy will boom.
8) Liquidity : Financial market provides a mechanism for liquidating the financial instruments. This means at
any given time, the investor can sell their financial instruments and convert them into cash. This is an important factor
for investors who do not want to invest for a long period.
9) Easy access : Both investors and industries need each other. The financial market provides a platform
where both the buyers and sellers can find each other easily.
10) Industrial development : Financial market helps in transforming savings into capital. Corporates use
the funds of investors to undertake productive or commercial activities thereby leading to economic development.
11) National growth : Financial market ensure continuous flow of surplus funds to those who need money. Thus,
they contribute to national growth.
12) investments : the financial market acts as a link between one who invests money and the one who borrows
money.
13) entrepreneurship growth : financial markets help in the growth and development of entrepreneurs by
continuously transferring funds from investors to the business units.
So, financial markets are the foundation of the economy of any country.
II) Explain the role and importance of financial market in the development of economy
Ans. The place where people and organisations wanting to borrow money, are brought together, with those having
surplus funds is called a financial market.
In an economy there are two different groups – one who invests money or lends money, the other who
borrows or uses the money.
A financial market acts as a link between these two groups. A financial market is an institutions that
facilitates exchange of financial instruments including deposits, loans, corporate stocks, government bonds, etc. it
mobilizes savings and channelizes them into productive uses.
a) Mobilisation of savings : Financial market is a place where surplus funds obtained from units such as households,
individuals, public sector units, central government etc. are channelized for productive purpose
b) National growth : Financial market ensure continuous flow of surplus funds to those who need money. Thus, they
contribute to national growth.
c) Development of industries : the continuous flow of funds by the financial markets help the growth and
development of industries. This in turn helps in raising the standard of living of the general public. Thus, it enables
economic development of the country.
d) investments : the financial market acts as a link between one who invests money and the one who borrows money.
e) entrepreneurship growth : financial markets help in the growth and development of entrepreneurs by
continuously transferring funds from investors to the business units.
f) Capital Formation : Financial Market provides a channel through which savings flow to industrial and
commercial organisations in the form of capital. This leads to capital formation.
g) Employment Generation : The capital market is contributed towards generation of capital. It supports the
development of small and large business. It creates employment opportunities for public.
h) Productive use of land : Financial market allows productive use of the fund. An excess fund of investors used by
borrowers for productive purpose.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 139 - STANDARD 12TH
So, financial markets are the foundation of the economy of any country.

*III) what is Money Market? Explain Instruments of Money Market.

Ans. *MONEY MARKET :*
Meaning : Money market is a market for lending and borrowing of funds for short term. It is a market wherein
lending and borrowing of funds take place for a short period of time which varies from one day to a year. Also the
financial instruments traded in this market can be converted into cash easily without any loss of time and value. It is
an important part of the financial system that helps in fulfilling the short term and very short term requirements of the
companies, banks, financial institutions, government agencies etc. It is a market for financial assets which are close
substitutes for money. The instrument like commercial paper, liquid and treasury bills etc. are traded in the money
market.
INSTRUMENTS OF MONEY MARKET :
In the money market, only those financial instruments are traded which are immediate substitute for
money. Some of these instruments are explained as follows :
1) Call money and Notice money : Call money and Notice money market is an important segment of the
money market in India. Under Call money, funds are lent or borrowed for very short periods i.e. one day. Under
Notice money, funds are lent or borrowed for periods between 2 days to 14 days. Funds have to be repaid within a
specified time on the receipt of notice given by the lender. When one bank faces temporary shortage of cash, then
another bank with surplus cash lends money to it. Hence Call/ Notice money market is also called as interbank Call
money market.
2) Treasury Bills (T-Bills) : Treasury Bills are short term securities issued by Reserve Bank of India on behalf
of the Central Government of India to meet the government's short term funds requirement. Treasury Bills have three
maturity periods - 91 days, 182 days and 364 days. These bills are sold to banks and individuals, firms, institutions,
etc. These bills are negotiable instruments and are freely transferable. The minimum value of T-bills is Rs. 25,000/- or
in multiples of Rs. 25,000/-. These are issued at a discount and repaid at par and hence they are also called Zero
Coupon Bonds.
3) Trade Bills/ Commercial Bills : Bill of Exchange also called as Trade bills are negotiable instruments or
bills drawn by a seller on the buyer for value of goods sold under credit sales. These have short-term maturity
period generally of 90 days and can be easily transferred. If the seller wants immediate cash, he can discount the
trade bills with Commercial banks i.e. sell it to banks for cash. When the trade bills are accepted by Commercial
banks it is known as Commercial Bills. Banks can rediscount the bills any number of times till the maturity of the bill.
4) Commercial Papers (CPs) : Commercial Paper is an unsecured promissory note issued by highly rated
companies, All India Financial Institutions, like SIDBI, Exim Bank etc. and Primary Dealers with a fixed maturity
period which varies from 7 days to maximum 1 year. The minimum value of CP is ` 5 lakhs or in multiples of ` 5
lakhs. It is issued at a discount to the face value and are highly liquid as it gives better returns than normal bank
deposits. Individuals, Banks, Mutual funds, Companies, etc. invest in Commercial Papers.
5) Certificate of Deposits (CDs) : These are unsecured negotiable promissory notes usually issued by
Commercial Banks and Financial Institutions. It is a receipt of funds deposited in a bank for a fixed period at a
specified rate of interest. It can be issued for a minimum value of ` 1 lakh or in multiples of ` 1 lakh. They can be
issued at a discount to the face value. They have a maturity period of minimum 7 days and maximum 1 year.
(Maximum maturity may be 3 years, if the CDs are issued by Financial Institutions.) CDs can be bought by
individuals, companies, etc.
6) Government Securities : The marketable debts issued by the government or by semi- government
bodies which represent claims on the government is known as government securities. These securities are issued by
agencies such as Central Government, State Government, local self-government e.g. Municipalities etc. These
securities are safe investment as payment of interest and repayment of principal amount are guaranteed by the
government.
7) Repo or Repurchase Agreement : Repo is an agreement where the seller of a security, (i.e. one who
needs money) agrees to buy it back from the lender at a higher price on a future date. Usually this agreement is
made between RBI and commercial banks. Repo rate is the rate at which banks borrow from RBI and Reverse repo
rate is the rate at which RBI borrows from banks. RBI uses the repurchase agreement to control the money supply in
the economy. These agreements are the most liquid of all money market investments having maturity ranging from 24
hours to several months.
8) Money Market Mutual Funds (MMMFs) : A Mutual Fund which invests in Money market instruments
like Call Money, Repos, T-bills, CDs, etc. is called as MMMFs. This type of Mutual Fund invest in debt instruments
which mature in less than 1 year and have low risk. Individuals and corporates are allowed to invest in MMMFs .

*IV) Explain features of Capital Market

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 140 - STANDARD 12TH
Ans. MEANING : It is the market for borrowing and lending long term capital required by business enterprises.
The financial assets dealt with in the capital market have long or indefinite maturity period. The capital market is a
core of a country's financial system as it helps in mobilisation of resources.
As per SEBI, capital market is a market for long term debt and equity shares. In this market, the capital funds
comprising of both equity and debt are issued and traded. This also includes private placement of debt and equity as
well as organized markets like stock exchanges.
One of the important functions of the capital market is to provide ease of transactions for both the investors
and companies.
Features of Capital Market :
Following are the main features of the capital market :
1) Link between investors and borrowers : The capital market links investors with the borrowers of
funds. It routes money from savers to entrepreneurial borrowers.
2) Deals in medium and Long-term investment : Capital market is a market where medium and long term
financial instruments are traded. Through this market, corporates, industrial organizations, financial institutions access
long-term funds from both domestic and foreign markets.
3) Presence of Intermediaries : Capital market operates with the help of intermediaries like brokers,
underwriters, merchant bankers, collection bankers etc. These intermediaries are important elements of a capital
market.
4) Promotes capital formation : Capital market provides a platform for investors and borrowers of long term
funds to trade. This leads to capital formation in an economy as it mobilizes funds .
5) Regulated by government rules, regulations and policies : Capital market operates freely. However, it
is regulated by government rules, regulations and policies. e.g. SEBI is the regulator of Capital markets.
6) Deals in marketable and non-marketable securities : Capital market trades in both marketable and non-
marketable securities. Marketable securities are securities that can be transferred. e.g. Shares, Debentures etc. and
non-marketable securities are those which cannot be transferred. e.g. Term Deposits, Loans and Advances.
7) Variety of Investors : Capital market has a wide variety of investors. It comprises both individuals like
general public and institutional investors like Mutual Funds, Insurance companies, Financial Institutions, etc.
8) Risk : Risk is very high here as the instruments have long maturity periods. However, the return on
investments is very high.

V) Explain constituents of Indian Capital Market

Ans. Capital market is mainly classified as
1) Government Securities Market or Gilt edged markets - In this market, Government and semi-
government securities are traded.
2) Industrial Securities Market - In this market, industrial securities, i.e. shares and debentures of new or
existing corporates are traded. This market is further divided into :
A) Primary or New Issues Market- here companies sell fresh shares, debentures, etc. for the first time to the
public.
B) Secondary Market - here already existing shares, debentures, etc. are traded through the Stock Exchanges
A) *PRIMARY MARKET :*
In Primary market, companies sell their shares, Debentures, etc. for the first time to raise fresh capital. It
exclusively deals with the issue of new securities, i.e. securities that are issued to investors for the very first time.
Hence this market is also known as New Issues Market.
The main function of the primary market is to facilitate capital formation. It is a place where investors can
invest their surplus funds profitably and companies can raise capital easily. On the basis of type of funds raised,
Primary market can be classified as Equity market and Debt market. In Equity market, securities like Equity shares,
Preference Shares, Rights Issue, etc. are issued. In Debt market, debentures, bonds, fixed deposits, etc. are issued.
Methods of Raising funds in the Primary market :
1) IPO (Initial Public Offer) : Initial Public Offer refers to the process of offering shares of a company to
the public for the first time. Investors can directly buy the securities from the issuing company.
2) FPO ( Further/follow-on public offer) : When a company issues shares to the public after an initial public
offer (IPO) it is called further/ follow-on public offer.
3) Rights Issue : When a company is in need of additional funds, they can first collect it from their
current investors by giving them an opportunity to buy the shares of the company. Such an issue of shares is called as
Rights Issue as the existing shareholders are given the ''right" to buy new shares before it is offered to the public.
4) Private placement : Private placement means when a company offers its securities to a select group of
persons identified by Board excluding qualified institutional buyers and employees (i.e. financial institutions, Banks,
Insurance companies, etc.) not exceeding 200. This helps the company raise the funds efficiently, quickly and
economically.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 141 - STANDARD 12TH
B)*SECONDARY MARKET :*
Secondary market is more commonly known as the stock market or the stock exchange. Here the previously
issued securities are bought and sold by the investors. After IPO, when the shares are listed at the Stock Exchange,
they can be traded in the secondary market. In this market the securities are traded between investors.
The main difference between the primary and the secondary market is that, in the primary market only new
securities are issued, whereas in the secondary market the already existing securities are traded. There is no fresh issue
in the secondary market

Q.2 ATTEMPT THE FOLLOWING. (FOUR MARKS EACH)

I) Explain features of Indian Money Market?

Ans. Features of Money Market :
1) The funds borrowed and lent in money market are for short term. The maximum period for which the funds are
traded in the market is one year.
2) It is a wholesale market for short term debt as the transaction volume is large.
3) Trading may take place over the telephone, after which written confirmation is done by way of e-mails.
4) Participants of money market include RBI, commercial banks, mutual funds, financial institutions, primary dealers
and corporates.
5) There is an impersonal relationship between the participants of the money market.
6) Money market has no geographical area i.e. there is no fixed place for carrying out transactions.
7) The instruments of money market can be converted easily into cash or have very short maturity periods.
Moreover, the returns on investment is also low.
8) Major segments of money market are :
a) Call money market
b) Certificate of Deposits market
c) Treasury Bill market
d) Commercial Bill market
e) Commercial papers market

II) Explain important participants in Indian Money Market

Ans. Some Important Participants in Money Market :
1) Reserve Bank of India : It is the most important participant in the money market. Through the money
market, RBI regulates money supply and implements its monetory policy. It issues government securities on behalf
of the government and also underwrites them. It acts as an intermediary and regulator of the market.
2) Central and State Government : Central Government is a borrower in the Money Market, through the issue
of Treasury Bills (T-Bills). The T-Bills are issued through the Reserve Bank of India (RBI). The T-Bills represent
zero risk instruments. Due to its risk free nature banks, corporates, etc. buy the T-Bills and lend to the government as
a part of its short-term borrowing programme. The state governments issue bonds called as State Development Loans.
3) Public Sector Undertakings (PSU) : Many listed government companies can issue commercial paper in
order to obtain its working capital.
4) Scheduled Commercial Banks : Scheduled commercial banks are very big borrowers and lenders in the
money market. They borrow and lend in call money market, short notice market, Repo and Reverse Repo market.
5) Insurance Companies : Both the general and life insurance companies are usual lenders in the money
market. They invest more in capital market instruments. Their role in the money market is limited.
6) Mutual Funds : Mutual Funds offer varieties of schemes for the different investment objectives of the
public. Mutual funds schemes are liquid schemes. These schemes have the investment objective of investing in money
market instruments.
7) Non Banking Finance Companies (NBFCs) : NBFCs use their surplus Funds to invest in government
securities, bonds etc. (Example of NBFC - Unit Trust of India)
8) Corporates : Corporates borrow by issuing commercial papers which are nothing but short-term
promissory Notes. They are the lender to the banks when they buy the certificate of deposit issued by the banks.
9) Primary Dealers : Their main role is to promote transactions in government securities. They buy as well
as underwrite the government securities.

*III) What is Primary Market? Explain methods of raising funds in the Primary Market
Ans. In Primary market, companies sell their shares, Debentures, etc. for the first time to raise fresh capital. It
exclusively deals with the issue of new securities, i.e. securities that are issued to investors for the very first time.
Hence this market is also known as New Issues Market.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 142 - STANDARD 12TH
The main function of the primary market is to facilitate capital formation. It is a place where investors can
invest their surplus funds profitably and companies can raise capital easily. On the basis of type of funds raised,
Primary market can be classified as Equity market and Debt market. In Equity market, securities like Equity shares,
Preference Shares, Rights Issue, etc. are issued. In Debt market, debentures, bonds, fixed deposits, etc. are issued.
Methods of Raising funds in the Primary market :
1) IPO (Initial Public Offer) : Initial Public Offer refers to the process of offering shares of a company to
the public for the first time. Investors can directly buy the securities from the issuing company.
2) FPO ( Further/follow-on public offer) : When a company issues shares to the public after an initial public
offer (IPO) it is called further/ follow-on public offer.
3) Rights Issue : When a company is in need of additional funds, they can first collect it from their
current investors by giving them an opportunity to buy the shares of the company. Such an issue of shares is called as
Rights Issue as the existing shareholders are given the ''right" to buy new shares before it is offered to the public.
4) Private placement : Private placement means when a company offers its securities to a select group of
persons identified by Board excluding qualified institutional buyers and employees (i.e. financial institutions, Banks,
Insurance companies, etc.) not exceeding 200. This helps the company raise the funds efficiently, quickly and
economically.

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) Financial markets acts as a link between investor and borrower

Reasons : a) The financial market is the market which brings together borrower and lender b) The financial
market attracts funds from investors by offering them variety of schemes and then collected funds is diverted into the
business organizations c) People having surplus cash invested into financial market securities, the financial
market provide finance then to businesses. D) Similarly, when financial market generate i9ncome from
investments in business, it shares with the investor,
So Financial Market is a link between borrower and lender

*II) Money Market makes available short term finance through different instruments
Reasons. A) The money market is the market which provides short term loans to business and government. B)
The loan period ranging from one day to one year C) Call money and notice money provides finance for period
between 2 days to 14 days D) Treasury bills offer finance for 91, 182 or 364 days. Trade bills or commercial
bills offer finance upto 90 days E) Commercial paper offer fiancé to business organizations from 7 days to 1 year.
Money market Mutual Fund offers fiancé for a maximum period of 1 year.
So, money market makes available short term finance through different instruments.

III) Primary Market is known as New Issue Market.

Reasons A) In Primary market, companies sell their shares, Debentures, etc. for the first time to raise fresh capital.
B) It exclusively deals with the issue of new securities, i.e. securities that are issued to investors for the very first
time. Hence this market is also known as New Issues Market. C) Funds are raised in this market through various
modes such as public issue/Prospectus, right issue and private placement D) Primary market is also beneficial for
capital formation in the country which in turn accelerates its economic and industrial development.
So, primary market is known as New Issue Market.

IV) Gilt Edged market is also known as Government Securities Market

Reasons A) Gilt Edged market is a market where government and Semi –Government securities are traded. So, it is
also known as government securities market. B) In such market, most Gilt Edged securities are traded. These are
the stocks and bonds issued by The central and State Government. C) These securities are considered as safe
investments as payment of interest and repayment of principal amount on them are guaranteed by the government.
Also there is no speculation on such securities. D) In Gilt Edged market, the major participants are public
corporation, such as LIC, Provident Fund and commercial banks. E) The government securities are mostly in the
form of stock certificates, promissory notes and government bonds,
So, Gilft Edged market is known as government securities market.

V) Repo Rate is known as official Bank Rate

Reasons : a) Repo rate refers to the discounted interest rate at which the Central Bank repurchases the Government
Securities. B) Such transaction is mainly carried out to reduce short term liquidity in the system. C) Here, the
Central Bank has the sole power to adjust i.e. increase or decrease the repo rate so as to control the money supply in
an economy. D) Additionally, the transaction are mainly carried out between the central Bank and Commercial
Banks at repo rate.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 143 - STANDARD 12TH
Due to all above reasons, repo rate is known as official bank rate.

VI) Capital Market facilitates mobilization of funds

|Reasons. A) Money market is a place where short term funds are borrowed and lent. B) it is a market for financial
assets that are close substitute for money C) The instruments dealt in money market are liquid and can be easily
converted into cash at low transaction cost. D) Due to this, the money market fails to facilitate mobilization of
funds. V) On the other hand, Capital Market, a market for long term instruments, facilitates mobilization of funds.
VI) In this market, the instruments such as bonds, debentures, equity shares and stocks having long or indefinite
maturity period are traded.
So, mobilization of funds is facilitated by capital market rather than money market.

*VII) Capital market is useful for corporate sector.

Reasons. A) Capital Market, a market for long term instruments, facilitates mobilization of funds. B) In this
market, the instruments such as bonds, debentures, equity shares and stocks having long or indefinite maturity period
are traded. C) Corporate sector issues these securities in the market and attracts savings from investor by offering
them variety of schemes. These savings become capital and get invested in business. D) It is helpful to develop
corporate and industrial sector.
So, capital market is useful for corporate sector.

*VIII) There are many participants in money market.

Reasons. Refer to Q.2(II)

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

*I) State any four functions of Financial Market

Ans. Refer to Q.1(I)

*II) State any four Features of money market

Ans. Refer to Q.2(I)

*III) state any four features of capital market.

Ans. Refer to Q 1(IV)

*IV) Explain any 4 types of money market instruments.

Ans. Refer to Q 1(III)

5) Write a note on importance of financial market

Ans. Refer to Q 1(II)

6) Explain constituents of Capital Market

Ans. Refer to Q 1(IV)

7) Write a note on Participants of Money Market

Ans. Refer to Q. 2(II)

Q.5 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

*I) Money Market and Capital Market

Points Money Market Capital Market

1) Meaning It is a component of the financial market It is a component of financial market where
where short-term borrowing takes place. long-term borrowings takes place.
2) Time In money market, the instruments traded In capital market, the instruments traded have
period have maturity period of one year or less maturity period of more than one year.
than one year.
3) Certificate of deposits, Repurchase Stocks, Shares, Debentures, Bonds, Securities
Instruments agreements, Commercial paper, Treasury of the government are the instrument of capital
bills, etc. are the instruments traded in the market.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 144 - STANDARD 12TH
money market.
4) Purpose of Funds are borrowed to meet working Long term funds are required to establish new
borrowing capital requirements or for small business, expand or diversify business or
investments. purchase of fixed assets.
5) Institutions Participants in the market are Central Stock exchanges, Commercial banks and Non-
banks, Commercial banks, Acceptance bank institutions, financial intermediaries, etc.
houses, Non-bank financial institution, Bill are the participants in the market.
brokers, etc.
6) Risk In the money market, risk factor is very In capital market, the risk is more as compared
less because maturity period of the to in the money market. The reason behind this
instruments is less than one year. is the instruments have long maturity period.
7) Return on Return on investment in money market is Return on investment in capital market is
Investment less as they are highly liquid and safe. comparatively high as they are more risky.
8) Role in This market increases liquidity of This market helps in mobilization of savings in
Economy funds in the economy. the economy.
9) Functions It exists as a mechanism of liquidity It functions as a link between the investors and
adjustment. It acts as a link between the entrepreneurs
depositors and borrowers
*II) Primary Market and Secondary Marketfd33
Points Primary Market Secondary Market
1) Meaning The issue of new shares by the company is The securities issued earlier are traded in the
done in the primary market. secondary market.
2) Mode of Direct investment in the securities. Indirect investment as the securities
Investment Securities are acquired directly from the are acquired from other stakeholders.
company.
3) Parties in The parties dealing in this market The parties dealing in this market
action are company and investors. are only investors.
4) The underwriters are the intermediaries. The security brokers are the intermediaries.
Intermediary
5) Value of The price of security in the primary market The price of security is fluctuating, depending
security is fixed as it is decided by the company. on the demand and supply conditions in the
market.
6) Other It is also known as new issue market. It is also known as stock market.
Name
7) Purpose The main aim of this market is to raise The aim of this market is to provide continuous
long term funds through fresh issue of and sundry market for existing long term
securities securities
8) The management of the corporate houses Here, the prices are determined by forces of
Determinant determines the prices in fulfillment with demand and supply in the market.
of price the SEBI requirements for new issue of
securities
9) Listing Listing is not required Listing is required

*III) Commercial Bills and Treasury Bills

Points Commercial Bills Treasury Bills
1) Meaning Commercial bills are the money market Treasury bills are the money market
instruments which are created to fulfill the instruments which are created to fulfill the
credit needs of Trade and Industry credit needs of government
2) Nature of They are in the form of bills of exchange They are in the form of promissory note
instrument
3) Maturity The maturity period is 3 months or 90 days The maturity period of treasury bills are 91, 182
Period or 364 days
4) Borrower Blue chip companies or big business Government is the borrower
organizations are the borrowers
5) Commercial bill market have not much Treasury bill have developed in money market
Development developed in the money market due to Government support
of Market

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 145 - STANDARD 12TH
*IV) Repo Rate and Reverse Repo Rate
Points Repo Rate Reverse Repo Rate
1) Meaning It is the interest rate at which central bank It is the interest rate at which commercial bank
repurchase the Government Securities repurchase the Government Securities
2) Level Repo Rate is always higher than Reverse |Reverse Repo Rate is always lower than Repo
Repo Rate Rate
3) Initiative It is carried out by central bank It is carried out by commercial bank
4) Lender and Here, lender is RBI and borrower is Here, lender is commercial bank and borrower
Borrower commercial bank is RBI
5) Borrower’s Its main objective is to manage short term Its main objective is to reduce overall supply of
Objective deficiency of fund money in the economy

Q.6 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*I) Joy ltd. Company is a newly incorporated company. It wants to raise capital for the first time by issuing
equity shares.
A) Should it go to primary market or secondary market to issue its shares ?
Ans. Joy Ltd. Should go to primary market to issue equity shares in the market. Primary market is mainly dealing
with fresh issue of securities
B) Should it offer its shares through public offer or rights issue ?
Ans. Joy Ltd. Should offer its shares through public offer (IPO) as Joy Ltd. Company is going to its securities first
time.
C) What will be the issue of Equity shares by Joy Ltd.Co. called as, IPO or FPO ?
Ans. when Joy Ltd. Issued its securities for the first ime then it is called IPO, if it offered securities for second or
subsequent time it is called FPO

*II) Mr. X is the CFO ( Chief Financial Officer ) of PQR Co. Ltd. which is a reputed company in the field of
construction business. Often Mr. X has to decide on investing surplus funds of the company for short durations.
And at times, he also has to decide the sources from where he can raise funds for short durations.
A) Assume on behalf of the company Mr. X has Rs. 5 lakhs and wants to invest for ashort period. Should he
buy Equity shares or Certificate of Deposit ?
Ans. As Mr. X wants to invest for a short period with amount of Rs. 5 lakhs, then he should buy certificate of deposit
B) The company has surplus funds and wants to invest it. However, he needs the money back in 4 months, so
should he invest in Treasury Bills or Government Securities ?
Ans. If he needs money back in 4 months, then he should invest in Treasury bills with option of 91 days Maturity
C) Can the company issue Certificate of Deposit ?
Ans. PQR Company Ltd. Is a construction company. Hence it cannot issue certificate of deposit as it can be issued by
commercial banks and financial institutions only

III) M/s Radheshyam company want short term loan (Borrowing) to meet its working capital needs. Hence as
an expert advice M/s Radheshyam on following matters
A) Can company select capital market to complete its working capital needs?
Ans. No, Company cannot select market to meet working capital requirement. Company should go for money market
B) If company select money market, names of the instruments through which short term finance can be built
up?
Ans. If company select money market option, it can build up finance through Trade Bill, commercial papers and
Money Market Mutual Funds.
C) Is completion of working capital needs important to Radheshyam Company?
Ans. Yes, complection of working capital needs important to Radheshyam company. Because working capital needs
are daily needs of business. Once it is completed production cycle can be work better.

IV) Government of India wants short term finance to deal with the short term deificit condition. Advice the
government on the following
A) Name of the instrument through which government can built up short term finance?
Ans. Treasury bill is the best option to build short term finance to the Government. It can be issued for 91, 182, 364
days etc.
B) What will be minimum amount of investment in Treasury bill?

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 146 - STANDARD 12TH
Ans. The minimum amount of investment in treasury bills is Rs. 25,000/-
C) Method of issue of Treasury Bill
Ans Treasury bills are issued at discount and repaid at par. Hence it is also caused as ‘zero’ coupon bond.

Q.7 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Financial Market

Ans. a) Every business unit has to raise short term as well as long term funds to meet the working and fixed capital
requirement. B) In any economy, there are two different groups, one who invests money or lends money and the
other who borrows or uses the money. C) The financial market acts as a link between these two different groups
D) The financial market provides a place or a system through which the transfer of funds by investors to the business
units is adequately facilitated. E) A financial market consists of two major segments. I) Money market II)
Capital Market
Money market deals in short term credit and capital market deals in medium term and long term credit.

*II) Capital Market

Ans. a) It is the market for borrowing and lending long term capital required by business enterprises. B) The
financial assets dealt with in the capital market have long or indefinite maturity period. C) The capital market is
a core of a country's financial system as it helps in mobilisation of resources.

III) Private Placement

Ans. A) Private placement means when a company offers its securities to a select group of persons identified by Board
excluding qualified institutional buyers and employees (i.e. financial institutions, Banks, Insurance companies, etc.)
not exceeding 200. B) This helps the company raise the funds efficiently, quickly and economically.

*IV) Money Market

Ans. A) Money market is a market for lending and borrowing of funds for short term. B) It is a market wherein
lending and borrowing of funds take place for a short period of time which varies from one day to a year. C) Also
the financial instruments traded in this market can be converted into cash easily without any loss of time and value.

*V) Call Money Market

Ans. a) call money and Notice Money market is an important segment of the money market in India. Under call
money, funds are lent or borrowed for very short period i.e. one day. B) Under Notice Money, funds are lent or
borrowed for periods between 2 days to 14 days. Funds have to be repaid within a specified time on the receipt of
notice given by the lender. C) When one bank faces temporary shortage of cash, then another bank with surplus
cash lends money to it. Hence call/Notice money market is also called as interbank Call Money Market.

VI) Government Securities

Ans. a) the marketable debt issued by Government, Semi-government which represent claims on the government is
known as ‘Government Securities’. B) These securities are safe as payment of interest and repayment of principal
amount are guaranteed.

VII) Repo Rate

Ans. A) Repo is an agreement where seller of a security agrees to buy it back from the lender it higher price on a
future date. B) This agreement is made between RBI and commercial bank. Here, commercial bank borrow from
RBI

VIII) Reverse Repo Rate

Ans. A) Reverse repo Rate is the rate at which RBI borrow from commercial banks B) Reverse Repo Rate is
always less than Repo Rate

*IX) Treasury bills

Ans. A) Treasury Bills are short term securities issued by Reserve Bank of India on behalf of the Central Government
of India to meet the government's short term funds requirement. A) Treasury Bills have three maturity periods -
91 days, 182 days and 364 days. These bills are sold to banks and individuals, firms, institutions, etc. These bills are
negotiable instruments and are freely transferable. C) The minimum value of T-bills is Rs. 25,000/- or in
multiples of Rs. 25,000/-. These are issued at a discount and repaid at par and hence they are also called Zero
Coupon Bonds.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 147 - STANDARD 12TH
*10) Commercial Bills
Ans. A) Bill of Exchange also called as Trade bills are negotiable instruments or bills drawn by a seller on the buyer
for value of goods sold under credit sales. B) These have short-term maturity period generally of 90 days and
can be easily transferred. If the seller wants immediate cash, he can discount the trade bills with Commercial banks
i.e. sell it to banks for cash. C) When the trade bills are accepted by Commercial banks it is known as
Commercial Bills. Banks can rediscount the bills any number of times till the maturity of the bill.

*11) Primary Market

Ans. A) It is a component of financial market where short term borrowing take place. B) In money market, the
instruments are traded not more than one year.

*12) Secondary Market

Ans. A) The securities issued earlier are traded in secondary market B) It is the market where existing securities
are resold or traded C) Only listed securities can be dealt in the secondary market

13) Gilt Edged Market

Ans. A) The gilt edged market is the market where government securities are traded. This market deals in
government and semi-government securities

*14) Money Market Mutual Fund

Ans. A) A Mutual Fund which invest in money market instruments like call money, Repos, Treasury Bills, CD’s, etc.
is called as Money Market Mutual Funds. This type of Mutual Fund invest in debt instruments which mature in less
than 1 year and have low risk. Individuals and corporate are allowed to invest in MMMFs

Q.8 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
*1) A financial market is a market in which people trade ................. and derivatives at low transaction costs.
a) Gold b) Financial securities c) Commodities
*2) When the trade bills are accepted by commercial banks it is known as .................
a) Treasury bills b) Commercial bills c) Commercial papers
*3) Money market is a market for lending and borrowing of funds for term.
a) short b) medium c) long
*4) Central Government is a borrower in the money market through the issue of .................
a) Commercial Papers b) Trade Bills c) Treasury Bills
*5)……… is the market for borrowing and lending long term capital required by business enterprises.
a) Money Market b) Capital Market c) Gold Market
6) A…………….is an institution that facilitates exchange of financial instruments.
A) Capital Market b) Financial Market C) Money Market
7) The……………Market contributes to the national growth by ensuring continuous flow of surplus funds to deficit
units
a) Financial b) Money c) Secondary
8) The market which provides short term funds is …………….
a) Capital Market b) Sold Market c) Money Market
9) The maturity period of commercial bills is…………….days
a) 90 b) 92 c) 96
10) …………….are debt instruments which are issued by corporate houses for raising short term financial resources.
a) Commercial papers b) Treasury bills c) Government Securities
11) The maturity period of treasury bills is………………..days
a) 192 b) 182 c) 172
12) The debt instruments which are issued by corporate house to raise funds from the money market is………
a) Certificate of deposit b) Preference Shares c) Commercial Paper
13)……………deals in medium and long term funds
a) Capital Market b) Gold market c) money market
14) The repurchase rate which is also known as the official bank rate is………..rate
a) repo b) Credit c) interest
15) …………..bills enjoy a high degree of liquidity
a) Treasury b) commercial c) Publicity
16) ……………is also known as new issue market
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 148 - STANDARD 12TH
a) Primary market b) Secondary market c) Financial market
17) the market which is also known as Government Securities Market is………….market
a) Primary b) Secondary c) Gilt Edged
18) A market where existing securities are resold or traded is called …………….market
a) commodity b) Secondary c) Primary
19) A Financial market is a link between investor and ………….
a) borrower b) Creditors c) capitalists
20) ……..plays an important role in the financial system of a country
a) Capital Market b) Money Market c) Financial Market
21) The market which provides short term fund is……………
a) capital market b) Gold Market c) Money Market
22) The market which deals in medium term and long term credit or fund is called……….
a) Money market b) Capital market c) Gold market
23) A security market in which new issues of securities i.e. shares and debentures are arranged or organized is
called…………..market.
A) primary b) secondary c) Bullion
24) In money market funds can be traded for a maximum period of ……….year/s
a) one b) five c) two
25) The debt instruments which are issued by corporate house to raise funds from the money market is……………
a) Certificate of deposit b) Preference shares c) commercial paper
26) ……………is the most common method to meet the credit needs of trade and industry
a) Commercial paper b) treasury bills c) commercial bills
27) The liquidity is………….in case of commercial bills.
a) high b) low c) constant
28) The repurchase rate which is also known as the official rate is……..rate
a) repo b) Credit c) Interest
29) The market which is also known as the Government securities market is………market
a) primary b) secondary c) Gild Edged
30) Under ………….the shares of a company are sold among the selected group of persons.
a) |Right issue b) Private placement c) Public issue
31) A market where existing securities are resold or traded is called ………….market
a) commodity b) secondary c) primary
Q.9 MATCH THE PAIR(ONE MARKS EACH)
*1) A GROUP B GROUP
1) Financial Market a) Long Term fund
2) Money Market b) New Issue Market
3) Primary Market c) Trading of commodities
4) Commercial Paper d) Short Term fund
5) Capital Market e) Trading of financial securities
f) Share market
g) Unsecured Promissory note
h) Secured Promissory note
Ans. (1-e),(2-d),(3-b),(4-g),(5-a),

2) A GROUP B GROUP
1) Treasury bill a) Long Term fund
2) Commercial bill b) New Issue Market
3) New issue c) Trading of commodities
4) stock exchange d) Short Term fund
5) Financial market e) Trading of financial securities
f) Share market
g) Unsecured Promissory note
h) Secured Promissory note
Ans. (1-e),(2-d),(3-b),(4-g),(5-a),

3) A GROUP B GROUP
1) Money market a) Most common method to meet credit needs
2) Commercial bill b) Primary Market
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 149 - STANDARD 12TH
3) Repo Rate c) interest
4) Gild Edged market d) Government securities market
5) Secondary market e) official bank rate
f) Treasury bills
g) financial market
h) short term funds are borrowed and lent
i) Stock exchange
j) Less applications than expected
Ans. (1-h),(2-a),(3-e),(4-d),(5-i),

Q.10 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
*1) A market where people trade financial securities and derivatives at low transaction cost.
*2) A market which provide long term funds.
*3) A market which provide short term funds.
*4) A money market instrument used by bank when one bank faces temporary shortage of cash.
*5) A bill which is issued by Reserve Bank of India on behalf of the Government of India.
*6) A market which exclusively deals with the new issue of securities.
7) An intermediary between the lender and borrower
8) A market where short term funds are borrowed and lent
9) A debt instrument issued by the corporate house for raising the short term funds from the money market
10) short term instrument issued by a commercial bank and special financial institutions
11) A type of bill in the nature of promissory note issued by the government
12) A market for borrowing and lending long term capital required by business enterprise.
13) the market which deals in the issue of new securities.
14) the government securities market which is for government and semi government securities
15) The equity shares of the companies which are issued to the existing equity shareholders
16) A market place where the existing securities are bought and sold
17) The place where buying and selling of securities takes place.
18) The institution which regulates business in stock exchange
19) A market for financial assets which are close substitutes for money.
20) A market where short term funds are borrowed and lent
21) A market for borrowing and lending long term capital required by business enterprise.
22) A debt instrument issued by the corporate house for raising the short term funds from the money market.
23) The negotiable term depo9sit certificates issued by the financial institutions at discount, at market rate or at par
24) A type of bill in the nature of promissory note issued by the government
25) The bill which is issued by the government for raising short term funds to bridge the gap between receipts and
expenditure
26) A market where productive capital is raised and made available for industrial purpose
27) A market for government and semi government securities
28) The market utilized for raising fresh capital in the form of shares and debentures
29) The equity shares of the companies which are issued to the existing equity shareholders
30) The most popular method of raising long term securities by offering them to public by using prospectus
31) a market place where the existing securities are bought and sold.

ANS. 1) Financial market 2) capital market 3) Money market 4) Call Money 5)

Treasury bill 6) Primary market 7) Financial market 8) Money market 9) commercial paper
10) certificate of deposit 11) treasury bill 12) Capital market 13) Primary market 14) Gilt
edged security market 15) Right issue 16) secondary market 17) stock exchange 18) SEBI
19) money market 20) money market 21) Capital market 22) commercial paper 23) certificate
of deposit 24) treasury bill 25) treasury bill 26) capital market 27) |Gilt Edged market
28) Primary market 29) Right issue 30) Public Issue 31) secondary/stock market

Q.11 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
*1) A Financial Market is a market in which people trade financial securities and derivatives at high transaction costs.
*2) Money market is the market for the long term funds.
3) Money market facilitates mobilization of funds
4) Repo Rate is known as official bank rate
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 150 - STANDARD 12TH
5) The financial market does not contribute towards nations growth and development
6) Commercial bill is a common method to meet long term needs of industry
*7) Capital market is the market for the long term funds.
*8) Primary market is also known as new issue market.
*9) Secondary market is commonly known as stock market.
*10) Commercial paper is a secured promissory note.
*11) Treasury bills are issued by commercial banks.
12) Reverse repo Rate is similar to Repo Rate
13) MMMFs is a part of capital market
14) Financial market brings together borrower and lender
15) Certificate of deposit is a part of money market.

ANS.
TRUE : 4, 7, 8, 9, 14, 15
FALSE : 1, 2, 3, 5, 6, 10, 11, 12, 13,

Q.12 FIND THE ODD ONE(ONE MARKS EACH)

*1) treasury bills, Shares, Certificate of Deposit
*2) FPO, Private Placement, Commercial Paper
*3) New Issues Market, Call Money Market, secondary market
4) 91 days, 182 days, 365 days
5) Share, Debentures, MMMFs
6) Treasury bill, Certificate of Deposit, Bond
7) Share, debenture, commercial paper
8) SEBI, RBI, SIDBI
9) Commercial paper, certificate of deposit, bond
10) Preference shares, equity shares, commercial bill

Q.13 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) Funds borrowed and lent in money market are for …………..term.
*2) When trade bills are accepted by commercial banks, it is known as ……………
*3) Unsecured negotiable promissory notes issued by a commercial bank is called as ………
*4) New shares, debentures, etc. are traded in ……….. market.
*5) In capital market the instruments traded have maturity period of more than …….year.
6) Financial Assets are exchanged in a ………
7) ………is dealing with second hand issue
8) Money Market is Regulated by………….
9) The Instruments of………..can easily converted into cash
10) .. …………….. is an unsecured promissory note issued by companies
11) Secondary market is commonly called as………….
12) ……Market increases liquidity of fund in the economy
13) ……….is dealing with mobilization of fund
14) Derivative market is specially designed to……………..
15) ……….are the intermediary of primary market
16) ……………… is also known as new issue market
17) ……………are the intermediary of Secondary Market
18) In…………..risk factor is very less
19) Government security market is also called as………….
20) Private companies deal their securities in……………….

ANS. 1) Short 2) Trade Bill 3) Certificate of deposit 4) Primary 5) One 6)

Financial Market 7) Secondary Market 8) RBI 9) Money Market 10) Commercial paper
11) Stock Exchange 12) Money 13) Capital Market 14) Derivates 15) Underwriters
16) Primary Market 17) Security brokers 18) Money market 19) Gilt Edged Market 20)
Industrial Securities Market

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 151 - STANDARD 12TH
Q.14 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS
EACH)
*1) A GROUP B GROUP
1) Money market a) …………..
2) Zero risk instrument b) ………….
3) …………. c) Capital market
4) …………. d) Secondary market
(Buying and selling of existing securities, treasury Bills, Funds for long term, fund for short term)
ANS 1) Fund for short term 2) Treasury bills 3) Fund for long term 4) Buying and selling of
existing securities

*2) A GROUP B GROUP

1) ………….. a) Promissory Note
2) ………… b) Short term credit
3) New Issue c) …………….
4) Stock exchange d) ……………
(Commercial bill, treasury bill, secondary market, primary market)
ANS 1) Treasury bill 2) commercial bill 3) primary market 4) secondary market

3) A GROUP B GROUP
1) Financial market a) …………….
2) Money Market b) …………….
3) …………. c) Primary Market
4) …………… d) commercial paper
5) capital market e) …………….
(Financial securities, Short Term, New issue, Unsecured Promissory note, long term)
ANS 1) Financial securities 2) short term 3) new issue 4) unsecured promissory note 5)
Long term

4) A GROUP B GROUP
1) ………… a) Gilt Edged Market
2) ………… b) Repo Rate
3) Commercial bills c) ……………..
4) Money market d) …………….
( Short term, most common method to meet credit needs, official bank rate, government securities)
ANS 1) Government Securities 2) Official bank rate 3) Most common method to meet credit needs
4) short term

Q.15 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) What is Financial market?
Ans. A financial market is a market where financial securities are exchanged. It act as an intermediary between
investors and borrowers
*2) what is call money market?
Ans. The call money market is a market where funds are borrowed or lent for very short period of 2 days to 14 days.
*3) What is Certificate of Deposit?
Ans. They are the negotiable term deposit certificates issued by commercial banks and financial institutions to build
short term finance.
*4) What is Trade Bill?
Ans. The seller draws a bill and buyer accept it, on acceptance the bill become marketable instrument called as Trade
Bill
*5) what is new issue market?
Ans. The market which is utilized to build fresh capital called as ,new issue market,
6) What is Repo Rate?
Ans. This is a rate at which commercial banks borrow money from central bank (RBI).
7) What is Secondary Market?
Ans..It is the market where existing securities are resold. It is also called as stock market.
8) What is treasury bill?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 152 - STANDARD 12TH
Ans. It is a short term security issued by RBI on behalf of central Government of India to meet governments short
term fund requirements.
9) What is commercial paper?
Ans. Commercial paper is an unsecured debt instrument issued by companies to build short term finance
10) What is Gilt Edged market?
Ans. The gilt edged market is the market where government securities are traded. This market deals is government
and semi government securities.

Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1) In Primary Market already existing securities are traded.
Ans. Secondary
*2) Companies sell fresh shares for the first time to the public in Secondary market
Ans. Primary market
*3) in Money market the instruments traded have maturity period of more than one year.
Ans. Capital
*4) Financial market can be classified as capital market and call money market
Ans. money market
5) Treasury bills are issued by companies
Ans. commercial papers
6) capital market build finance for short term
Ans. Money market
7) Gilt Edge market deals with corporate securities
Ans. Industrial securities market
8) Government uses commercial bills to build short term finance
Ans. Treasury bills
9) Mutual Fund deals in Money Market
Ans. Money market
10) The minimum value of commercial paper is 6 lakhs

Ans. 5 lakhs
11) Trade bills are unsecured negotiable promissory note issued by Banks
Ans. Certificate of deposits
12) Underwriters are the intermediary of secondary market
Ans. security brokers
13) Direct Investment took place is secondary market
Ans. Indirect investment
14) in Primary market security price is fixed by demand and supply
Ans. Secondary market
15) Primary market the parties dealing in this market are only investor
Ans. secondary market

Q.17 ARRANGE IN PROPER ORDER(ONE MARKS EACH)

1) arrange the given instruments by using minimum amount criteria
a) Certificate of deposit b) commercial paper c) treasury bill
Ans. a) Treasury bill b) Certificate of deposit c) Commercial paper

2) Arrange the following instruments on the basis of ‘year of beginning’

a) commercial paper b) certificate of deposits c) treasury bills
Ans. a) treasury bills (1990) b) Certificate of deposits (1989) c) Commercial papers (1917)

3) Arrange the following securities on the basis of redemption.

a) preference shares b) equity shares c) Debentures
Ans. a) Debentures b) Preference shares c) Equity shares

CHAPTER 11. FINANCIAL MARKET

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 153 - STANDARD 12TH

Q.1 GIVE ANSWER IN DETAIL. (EIGHT MARKS EACH)

*I) What is stock Exchange> Explain the organizational structure and features of stock exchange.
Ans. Stock exchange is a specific place where various types of securities are purchased and sold. The term securities
include equity shares, preference shares, debentures, government securities and bonds, etc. including units of Mutual
Funds. Stock markets act as intermediary between investors and borrowers. To provide safety and stability to the
investors, Stock exchanges in India are regulated by SEBI.
London Stock Exchange which was founded in 1571 is the oldest Stock Exchange in the world while Bombay
Stock Exchange which was founded in 1875 is the oldest stock exchange in India.
Organization Structure of Stock Exchanges in India :
In India, the stock exchange may be organized in one of the following three forms.
I) Voluntary non-profit making organization.
II) Companies with liability limited by shares
III) Companies with liability limited by guarantee.
The Securities Contract (Regulations) Act 1956, provides rules for their functioning, licensing, recognition
and for controlling speculations.
The important features of a stock exchange are as follows -
1) Market for Securities : Stock exchange is a place where all types of corporate securities as well as
securities of government and semi-government bodies are traded.
2) Second Hand Securities : Securities traded in Stock exchange are those securities which are already issued
by the companies. In other words, second hand securities are bought and sold among investors in a stock exchange.
3) Listed Securities : Only securities that are listed with the stock exchange can be traded on a stock exchange.
Listing of securities helps in protecting the interest of investors as companies have to strictly comply with the rules
laid down by the stock exchange.
4) Organised and Regulated Market : All Listed Companies have to comply with the guidelines of SEBI.
Companies will also have to function as per the rules and regulations laid down by the Stock exchange.
5) Specific Location : Stock exchange is a specific physical place where securities are traded. It is a market
place where brokers and intermediaries meet to conduct dealings in securities. Today, all trading is done
electronically on a stock exchange.
6) Trading only through Members : Securities in a Stock exchange can be traded only by the members
of the exchange on their own behalf or through authorised brokers

*II) Explain the function of Stock Exchange

Ans. FUNCTIONS OF STOCK EXCHANGE
1) Mobilisation of Savings : Stock markets are organised and regulated market which protects the interests of
the investors. This encourages small and big investors to invest in securities through the stock exchange. It thus
provides a ready market for buying and selling securities.
2) Capital formation : Investors in securities are attracted due to good returns on investments and capital
appreciation. This attracts more investors to invest through the stock exchange. Corporates too can easily raise funds
by offering various types of securities to meet the needs of different types of investors. Thus Stock exchange serves as
a tool for capital formation.
3) Pricing of Securities : The stock market helps to value the securities on the basis of demand and supply
factors. The securities of profitable and growth oriented companies are valued higher as there is more demand for such
securities. The valuation of securities is useful for investors, government and creditors. The investors can know the
market value of their investment. The creditors can estimate the credit worthiness of a company.
4) Economic Barometer : A stock exchange is a reliable barometer to measure the economic condition of a
country. Every major change in country and economy is reflected in the prices of shares. The rise or fall in the share
prices indicates the boom or recession cycle of the economy. Stock exchange is also known as a pulse of economy or
economic mirror as it reflects the economic conditions of a country.
5) Protecting Interest of Investors : Stock exchange protects the interest of investors. In stock market only the
listed securities are traded. Stock exchange allows listing only after verifying the soundness of company. The
companies which are listed have to operate within the strict rules and regulations laid down by the stock exchange.
This ensures safety of dealing through stock exchange.
6) Liquidity : The main function of stock market is to provide ready market for sale and purchase of
securities. The presence of stock market gives assurance to investors that their investment can be converted into cash
whenever they want. The investors can invest in long term investment projects without any hesitation, as because of
stock exchange they can convert long term investment into short term and medium term or even liquidate their
investments whenever they want.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 154 - STANDARD 12TH
7) Better Allocation of Capital : The shares of profit making companies are quoted at higher prices and are
actively traded so such companies can easily raise fresh capital from stock market. The prices of securities traded in
the exchange indicates the opportunities for investments. So stock exchange facilitates allocation of investors fund to
productive and profitable channels.
8) Contributes to Economic Growth : In stock exchange, securities of various companies are bought and
sold. Investors invest in companies which give good return on investments. Hence companies, too, try to invest in
most productive investment projects. This leads to capital formation as well as economic growth.
9) Providing Scope for Speculation : To ensure liquidity and demand or supply of securities the stock
exchange permits healthy speculation of securities.
10) Promotes the Habit of Savings and Investment : The stock market offers attractive opportunities of
investment in various securities. These attractive opportunities encourage people to save more and invest in securities
of corporate sector rather than investing in unproductive assets such gold, silver, etc.

III) explain the importance of stock exchange./State and explain the role of stock exchange (OR)
Ans. In 1991, post liberalization era, Indian capital market has shown dynamic growth. The role of stock exchange
in capital market is as follows
a) Encourages capital formation : a common investor is now being attracted to capital market and so capital market
is getting the advantage of broader base. Today investor is preferring to divert his surplus and saving in the securities
like shares, debentures and mutual funds. As a result new capital formation is speeded up.
b) Resource mobilization : As stock exchanges are providing a common platform for transfer of funds from one to
another or in other words due to continuous buying and selling of the securities, the resources of the economy flow
from one company to other company giving comparatively higher returns. This helps mobilization of resources.
c) Helps in Rapid economic development : The stock exchanges help in the process of rapid economic development
by speeding up the process of capital formation as well as resource mobilization. It helps in raising medium term
capital as well as long term capital for the development of the and expansion of the company. new industries and
commercial enterprises could easily acquire capital funds.
d) Flexibility in investments : The stock exchanges provide to the investment made in the securities. As there are
multiple options available for the investment, investors can flexibly go on changing their investment where it is more
beneficial.
e) Safety in investments : Stock exchanges are the primary regulators for the transactions at the stock exchanges. But
SEBI keeps constant watch on the activities of the stock exchanges in the interest of the investors.
f) value addition to the securities : Listing of shares at the stock exchange adds to the prestige and reputation.
Companies with the advantages of listed shares could raise loans funds from the corporate sector.

Q.2 ATTEMPT THE FOLLOWING. (FOUR MARKS EACH)

*I) State any four features of stock exchange (OR) What are the features of stock exchange?
Ans. According to the Securities Contracts (Regulation) Act 1956, the term stock exchange is defined as,
“An association, organization or body of individuals, whether incorporated or not, established for the purpose of
assisting, regulating and controlling of business in buying, selling and dealing in securities.”
Husband and Dockerary have defined stock exchange as :
“Stock exchanges are privately organized market which are used to facilitate trading in securities.”
Features of Stock Exchange
Refer to Q. 1 (I)

*II) Write about the major stock Exchanges in India

Ans. Following are the two most important Stock Exchanges in India
1) Bombay Stock Exchange (BSE) :
BSE - Bombay Stock Exchange, was set up in 1875. At that time it was called as The Native Share and
Stock Broker’s Association. It is located in Dalal Street in Mumbai.
It is Asia’s first Stock exchange. It is the first listed stock exchange in India. It is the 11th largest stock
exchange in the world in terms of market capitalisation. It has the largest number of companies listed with it.
(Approximately over 5000 companies are listed in the BSE.) It is now a demutualised and corporatized entity
registered under the Companies Acts, 1956.
The BSE switched to an electronic trading system in 1995. This automated, screen-based trading
platform is called BSE On-Line Trading (BOLT). The BSE has also introduced a centralized exchange based
internet trading system, bsewebx.co.in to enable investors anywhere in the world to trade on the BSE Platform.
2) National Stock Exchange (NSE) :

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 155 - STANDARD 12TH
NSE was set up by a group of leading Indian Financial Institutions in 1992 as a company and was recognized
as a Stock Exchange in 1993 under the Securities Contracts (Regulation) Act, 1956. It started trading activities in
1994. It is the largest and most modern stock exchange in India.
The NSE is located in Mumbai. It was the first demutualized electronic exchange in India. NSE was the
first exchange in the country to provide a modern, fully automated screen- based electronic trading system
which offered easy trading facility to the investors. The main index of NSE is the NIFTY which was launched in
1996.

Q.3 JUSTIFY THE FOLLOWING STATEMENTS. (FOUR MARKS EACH)

*I) The Securities and Exchange Board of India SEBI is the regular for the securities market in India
Reasons : a) The Securities and Exchange Board of India was set up on 12 th April 1988. The main purpose of setting
up SEBI was to develop and regulate stock exchanges in India. B) Objectives of SEBI are to protect the interest of
the investors and regulate the securities market in India. C) to bring professionalism in the working of
intermediaries in the capital markets, i.e. brokers, mutual funds, stock exchanges, demat- depositories etc. is also
feature of SEBI D) Role of SEBI also includes creating a good financial climate, so that companies can raise long
term funds through the issue of securities-shares and debentures. E) The main function of SEBI is to register
and regulate the working of stock brokers, sub brokers, share transfer agents who may be associated with securities
market.
So SEBI is the regulator for the securities market in India.

*2) Stock Exchange is a Secondary Market

Reasons a) Stock exchange or securities market is a place where securities are brought and sold. B) securities market
can be classified into primary and secondary market. C) when the investors directly apply to the issuer company,
then it is called primary market. D) when the company closes the issue, a number of persons who bought these
shares can generate higher returns on them selling them at higher price. E) this buying and selling is done in the
secondary market called stock exchange.

III) The objective of SEBI is to protect the interest of investors.

Reasons : a) The main objective of SEBI is to prevent some undesirable practices like insider trading, insufficient
information to investors, regulate the working of stock exchange etc. b) all the transaction in the stock exchanges
are controlled by the Securities Control (Regulation) Act, 1956, which protects the rights and interest of the investors.
C) Fradulent Practices by the jobbers, brokers, top officials are punishable with imprisonment and fine. D) SEBI
helps in the flow of savings into the market, promotes fair dealings and regulates the code of conduct. Hence, it
protects the interest of the investors.

*IV) Stock exchange work for the growth of Indian economy

Reasons: 1) Due to existence of stock exchanges, new industries and commercial enterprises easily acquire capital
funds as well as loan funds through the issue of securities thereon. In the stock exchange, the demand for
issued(second hand) securities is created by the members(brokers) leading banks, related financial institutions and
their branches. As a result, industries and commercial enterprises easily raise the required capital and loan funds
through the issue of securities in the stock exchange.
2) the stock exchange system support and promote industrial development and growth. They stimulate investment in
productive sector which in turn helps in the process of economic development of the nation. Usually investors,
instead of investing their savings in the unproductive field, invest them in the securities of the companies. As a result,
new capital and finance are made available to the companies. Thus, growth of stock exchanges reflects financial
progress
3) In the stock exchanges new opportunities are available to investments. The long term as well as medium term
capital for their development and modernization are made available to the new as well as existing companies when
they issue securities in the stock exchanges. Thus, stock exchanges contribute a lot in the process of financial growth
of the country.
4) Stock exchanges are barometer which indicate the general conditions of the business in the economy. The level or
height of the index of the stock exchange reflects the financial progress and economic development of the nation. If
the national economy is strong and financially healthy, then the stock exchanges will reflect such a strong economic
position. This is because, the stock markets are at high, the economic growth is high and vice versa.

V) Insider trading is considered illegal

Reasons : a) Insider trading refers to trading of shares on the stock exchanges with sensitive information, which is not
yet published. B) The insiders include managers, directors, other employees, auditors etc. who have hold over
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 156 - STANDARD 12TH
sensitive information and accordingly buy or sell on the stock exchanges. C) For instance, if the sensitive
information relates to likely high growth in profits of the company, then the insiders may buy the shares at low price
and when the information is published, the share price may shoot up considerably resulting in the insiders selling and
making huge profits. D) Insider Trading is restricted by SEBI
Insider trading is considered illegal.

Q.4 ANSWER IN BRIEF . (FOUR MARKS EACH)

I) Explain the management and organizational structure of Stock Exchange in India

Ans. Management of Stock Exchange :
Executive committee of stock exchange looks after the overall activities and management of stock exchange.
The composition, powers and the name of the executive committee differs from exchange to exchange. There are
other supporting committees to assist the executive committee like advisory committee, listing committee, etc.
Organization Structure of Stock Exchanges in India :
In India, the stock exchange may be organized in one of the following three forms.
I) Voluntary non-profit making organization.
II) Companies with liability limited by shares
III) Companies with liability limited by guarantee.
The Securities Contract (Regulations) Act 1956, provides rules for their functioning, licensing, recognition
and for controlling speculations.
Membership of Stock Exchange :
The eligibility criteria for membership may differ from stock exchange to stock exchange (For additional
information refer website of respective stock exchange.)

II) state the functions of SEBI

Ans. SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
The Securities and Exchange Board of India (SEBI) is the regulator of the capital markets in India. The SEBI
was established in 1992 under the Securities and Exchange Board of India Act, 1992. It has its headquarters in
Mumbai and has many regional and local offices all over India.
Functions of SEBI :
SEBI was set up with the objective of promoting the securities market, protecting the interest of the investors
in securities market and to regulate the securities market. SEBI issues rules and regulations to be followed by the
issuers of securities, the market intermediaries and the investors. It is a regulator of all the Stock exchanges in India.
The various functions of SEBI are -
1) To protect the interest of investors in securities market.
2) To promote the development of securities markets.
3) To regulate the business in stock exchanges and any other securities market.
4) To register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustee
of trust deeds, registrars to an issue, merchants bankers, underwriters, and such other intermediaries who may be
associated with securities market.
5) To register and regulate the working of the Depositories, Depository Participants, Custodians of securities, foreign
institutional investors, credit rating agencies.
6) To register and regulate the working of venture capital funds and collective investment schemes including mutual
funds.
7) To promote and regulate self-regulatory organizations.
8) To prohibit fraudulent and unfair trade practice relating to securities markets.
9) To promote investors’ education and training of intermediaries of securities market.
10) To prohibit insider trading in securities.

Q.5 DISTINGUISH BETWEEN THE FOLLOWING. (FOUR MARKS EACH)

I) Bull and Bear
Points Bull Bear
(1) Meaning A speculator who purchases the securities A speculator who sells the securities when the
with the intention to sell them at a higher prices of securities start falling is called the
price later is called the bull Bear
(2) Function A bull buys securities at lesser price and A bear buys securities at a lesser price and sells
sells them at a maximum higher price to them at a little higher price to make desirable

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 157 - STANDARD 12TH
make maximum possible profit profit and to avoid selling at still lower price in
the future
(3) A bull always anticipates that the prices of A bear always anticipates that the prices of
Expectation securities will rise further in future. securities will fall further in the future.
(4) Other A bull is also called ‘Tejiwala’. This is A bear is also called as ‘Mandiwala’. This is
names because he always anticipates the price to because he always expects the price to fall
rise.
(5) A bull takes an optimistic view of the A bear takes a pessimistic view of the future.
Nature/view future.
of future

*II) Jobber and Broker

Points Jobber Broker
(1) Meaning Jobber is one who buys and sells securities Broker is an agent who deals in buying and
in his own name. selling of securities on behalf of his client.
(2) Nature of A jobber carries out trading A broker carries out trading activities with the
Trading activities only with the broker. jobber on behalf of his investors.
(3) A jobber is prohibited to directly buy or A broker acts as a link between the jobber and
Restrictions sell securities in the stock exchange. Also the investors. He trades
on Dealings he cannot directly deal with the investors. i.e. buys and sells securities on behalf of its
investors.
(4) Agent A jobber is a special mercantile agent. A broker is a general mercantile agent.
(5) Form of A jobber gets consideration in the A broker gets consideration in the form of
Consideration form of profit. commission or brokerage.
6) Dealings A Jobber carries on trading only with the A broker carries on trading with the jobber on
broker behalf of investors

Q.6 STUDY THE FOLLOWING CASE/SITUATION AND EXPRESS YOUR

OPINION(FOUR MARKS EACH)

*I) Mr. Y is a practicing company Secretary offering advisory services to companies, institutions etc. on
corporate laws including Companies Act. He has received few queries from his clients, please assist Mr. Y in
answering them.
A) BDl bank wants to offer DP services. Whom should they approach for registering as DP ?
Ans. If BDI banks wants to offer DP services. They should apply the concerned Depository for registering themselves
B) KM Financial wants to offer Debenture Trustee services. Where should they apply for getting registered ?
Ans. If KM Financial wants to offer Debenture Trustee services, they should be registered with SEBI to act as a
Debenture Trustee
C) TT Ltd. Co. wants to issue an IPO. Should it get itself registered with SEBI ?
Ans. The entire IPO process being regulated by SEBI

*ii) Mr. P has a recently got his B.Sc. degree. He has enrolled for a course in securities market. As a new
student of this subject, he has few queries as follows :
a) Does a Company need to be listed on a stock exchange to sell its securities through the stock exchange.?
Ans. Yes, a Company need to be listed on a stock exchange to sell its securities through the stock exchange
B) What is the term used for referring to a stock exchange’s ability to reflect the economic conditions of a
country ?
Ans. A stock exchange is the ‘Economic Barometer’ and acts as an economic mirror that reflects the economic
conditions of a country. E.g. boom, recession etc.
C) What is the term which refers to the functions of stock exchange as a provider of ready market for sale and
purchase of security ?
Ans. The ‘Liquidity’ function is the main function of stock exchange as it provides ready market for sale and purchase
of securities.

III) Ajay is a licensed member of stock exchange. Arnav his client wants to purchase the securities. Answer
the following question from the above situation
A) By what term/name will Ajay be known?
Ans. Ajay will be known as ‘Broker’
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 158 - STANDARD 12TH
B) How did Ajay become/acquire the term?
Ans. Ajay acquire the term as ‘Broker’ by registering himself with the stock exchange as it is required for the purpose
of trading in Stock Exchange
C) How did the transaction between them take place?
Ans. The transaction between Ajay and Arnav was validated by a note given by Ajay to his client Arnav. This note is
called contract note which both Ajay and Arnav had a copy each immediately after their transaction within 24 hours.

IV) Anurag is an employee of the Stock Exchange who passes sensitive information relating to likely high
growth in profits of ‘sun’ company to his relative Jyoti. Jyoti thus buys shares at low price. But due to Corona
Virus spread and lockdown and worldwide panic the sensex is moving swiftly in downward direction. Answer
the following queries
A) Describe the nature or the term that describes Jyotis Action?
Ans. The term that describes Jyoti’s action is known as ‘Insider Trading’ means trading due to non public sensitive
information about ‘SUN’ company
B) Is Jyoti’s action normal? Why?
Ans. Jyoti’s action which is based on insider information is illegal. It is unfair to other investors who do not have
access to the information.
C) what is this downward direction called?
Ans. If the Sensex/Nifty moves in downward direction it is called ‘CRASH’

V) Moon Co. Ltd listed its shares in Bombay Stock Exchange i.e. BSE. Due to COVID pandemic the Stock
Exchanges in India came crashing down. Answer the queries.
A) What do you mean by the term Stock Exchange Crash?
Ans. If the sensex or Nifty moves in downward direction, it is called as crash.
B) what is the Inded of BSE called?
Ans. The index of BSE is called Sensex which represents the increase or decrease in prices of stock of selected group
of companies.
C) The Index of BSE comprises of how many companies?
Ans. The index of BSE is called Sensex which represents the increase or decrease in prices of stock of selected group
of companies

VI) Kith Bionics Ltd. A newly formed company makes a public issue of shares for the first time to raise capital
funds. It also gets itself listed for the first time with BSE. Answer the queries
A) what is Kenith Bionics first time issue termed as/called?
Ans. The public issue of shares or other securities by the new company, ‘Keith Bionics Ltd’ is termed as/called as
‘Initial Public Offer’
B) what do you mean by listing with BSE?
Ans. Listing means an agreement signed by Keith Bionics Ltd. With BSE so that its shares and securities get a
platform to be bought and sold in BSE multiple times
C) What is the advantages of listing to Keith Bionica Ltd.
Ans. Because of listing with BSE the shares and securities of Keith Bionica Ltd. Can be bought and sold in BSE
repeatedly thus providing marketability along with liquidity for this company’s shares

Q.7 EXPLAIN THE FOLLOWING TERMS/CONCEPTS (TWO MARKS EACH)

*I) Stock exchange

Ans. Stock exchange is a specific place where various types of securities are purchased and sold. The term securities
include equity shares, preference shares, debentures, government securities and bonds, etc. including units of Mutual
Funds. Stock markets act as intermediary between investors and borrowers. To provide safety and stability to the
investors, Stock exchanges in India are regulated by SEBI.

*II) Broker
Ans. He is a member of a stock exchange who is licensed by stock exchange to buy or sell shares on his client’s
behalf. He is an agent between the investors and Jobber. His income is in the form of commission or brokerage.

*III) Jobber
Ans. A Jobber is a dealer in stock exchange who carries on trading of securities in his own name. He buys
securities as an owner and sells them at a higher price. The profit he makes is his income.
He is a professional speculator in the stock exchange. He is not permitted to deal with investors directly.
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 159 - STANDARD 12TH

IV) Bull
Ans. Bull (Tejiwala) : A Bull is a speculator who expects the price of a share to rise in the future and buys with
the hope of selling them at the higher prices to earn profit. His views are optimistic. Bulls actions leads to higher
prices for securities as there is excess of purchase over sales.

*V) Bear
Ans. 4) Bear (Mandiwala) : A bear is a speculator who expects fall in the price of a security. Hence he sells his
securities at the prevailing prices to avoid loss as he expects further fall in prices. Bears action leads to lowering the
prices of securities as there is excess of sales over purchase.

VI) Contract Note

Ans. It is a note given by a broker to his client. It will be in a specific form. It validates the transaction. Both the
broker and the client will have one copy each immediately after the transaction within 24 hours.

*VII) Insider Trading

Ans. Insider trading is the trading of a public listed company’s securities by individual with access to non-public
information about the company. Trading based on insider information is illegal. This is because it is seen as unfair to
other investors who do not have access to the information.

*VIII) Sensex
Ans. It is the Index of the BSE which represents the increase or decrease in prices of stocks of selected group of
companies. Sensitive Index called as Sensex is made up of 30 largest and actively traded stocks of listed companies.
It was created in 1986.

*IX) Nifty
Ans. It is the index of the NSE. It is made up of 50 listed companies. It includes all the 30 Sensex stocks. It was
created in 1996.
*X) Crash
Ans. If the Sensex or Nifty moves in downward direction, it is called as a crash. Bears are active during this period.

*XI) Stop Loss

Ans. It is an instruction or order given by an investor to the broker to buy or sell a security when it reaches a
certain price. This instruction is given by the investor when he wants to avoid losses when the prices fall below the
stop price.

Q.8 SELECT THE CORRECT ANSWER FROM THE OPTIONS GIVEN BELOW
AND REWRITE THE STATEMENTS(ONE MARKS EACH)
1) The Securities Contracts (Regulation) Act was passed in the year……
a) 1956 b) 1947 c) 1971
*2) A stock exchange is where stock brokers and traders can buy and sell ....................
a) gold b) securities c) goods
3) SEBI was established in the year ………………
a) 1988 b) 1987 c) 1986
*4)) The ................................... is the first stock exchange to be recognized by the Indian Government under the
Securities Contracts (Regulation) Act.
a) BSE b) NSE c) OTCEI
5) The oldest stock Exchange in Asia is …..
a) BSE b) NSE c) LSE
*6) .................................. is a dealer in stock exchange who carries on trading of securities in his own name.
a) Jobber b) Broker c) Bull
7) The BSE switch to electronic trading system in ………….
a) 1988 b) 1995 c) 1956
*8) A .................................. who expects fall in price of a securities.
a) bull b) bear c) jobber
9) Stock exchange is also formed or termed as…………….
a) Local Market b) Super Market c) Stock Market

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 160 - STANDARD 12TH
*10) The practice of buying and selling within the same trading day before the close of the market on that day is called
..................................
a) insider trading b) day trading c) auction

Q.9 MATCH THE PAIR(ONE MARKS EACH)

1) A GROUP B GROUP
1) SEBI a) SENSEX
2) Stock Exchange b) Primary market
3) NIFTY c) Auction
4) Bear d) Made Up of 50 listed companies
5) SENSEX e) Optimistic about rise in prices of securities
f) Pessimistic about rise in prices of securities
g) Purchase and sale of shares
h) Machinery regulating stock exchanges
i) BSE
j) NSE
Ans. (1-h),(2-g),(3-d),(4-f),(5-i),

2) A GROUP B GROUP
*A GROUP B GROUP
1) Bull (sept 09, mar 10) a) a secondary market for securities
2) stag b) auction
3) broker c) invests in primary market
4) stock exchange (sept 08,11) d) mandiwala
5) NSE e) deals on behalf of his client
f) a broker optimistic(positive) about rise in prices of
securities
g) a broker pessimistic (negative) about fall in prices of
securities
h) 1992
i) 1988
j) 1996
Ans. (1-f),(2-c),(3-e),(4-a),(5-h),

*3) A GROUP B GROUP

1) SEBI a) Expects the prices of shares to rise in future
2) Day Trading b) Expects the prices of shares to fall in future
3) Bull c) Buying and selling of securities during the same trading
day
4) Bear d) To protest the interest of investors in securities market
5) BSE e) Buying and selling of securities to particular investor
f) One of the oldest stock exchanges in India
g) To protect the interest of companies in securities market
h) Buying and selling of securities within a week
i) Newest Stock Exchange in India
j) One who investors in new issues of securities
Ans. (1-d),(2-c),(3-a),(4-b),(5-f),

Q.10 WRITE A WORD OR A TERM OR A PHRASE WHICH CAN SUBSTITUTE

EACH OF THE FOLLOWING STATEMENTS (ONE MARKS EACH)
1) He/she acts as a link between Jobber and the Investor
*2) A specific place where trading of securities is arranged in an organized method.
3) The securities contract (Regulation) Act 1956, provides the functioning, licensing of this institutions
*4) The first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation
Act.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 161 - STANDARD 12TH
5) The first listed Stock Exchange in India
*6) A dealer in stock exchange who carries on trading of securities in his own name.
7) The professional speculator in the Stock Exchange
*8) A speculator who expects the price of shares rise in the future.
9) An intermediary between investor and broker
10) The single and most important institution in the secondary market for securities

ANS. 1) Broker 2) Stock Exchange 3) Stock Exchange 4) BSE 5) BSE 6) Jobber

7) Jobber 8) Bull 9) Jobber 10) Stock Exchange

Q.11 STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR

FALSE (ONE MARKS EACH)
1) Stock Exchange in India is regulated by SEBI
*2) A broker is a dealer in Stock Exchange who carries on trading of securities in his own name
3) Stock Exchange is also called as Primary Market
*4) A Bear is a speculator who expects the prices of shares rise in the future
5) The NSE is the first listed Stock Exchange in India
*6) Bombay Stock Exchange is the oldest Stock Exchange in India
*7) A Stock Exchange is a reliable barometer to measure the economic condition of a country
8) The objective of SEBI is to protect the interests of companies
9) Securities market is an organized market in India
10) Stock Exchanges reflect financial progress of a country.
11) There is no control on Stock Exchange
12) Stock Exchange is a place for buying and selling securities
13) Insider Trading is legally permitted.
ANS.
TRUE : 1, 6, 7, 9, 10, 12,
FALSE : 2, 3, 4, 5, 8, 11, 13
Q.12 FIND THE ODD ONE(ONE MARKS EACH)
1) BSE, NSE, LSE
2) Crash, Bull, Bear
3) Sensex, Rally, Nifty

Q.13 COMPLETE THE SENTENCE (ONE MARKS EACH)

*1) The oldest Stock Exchange in India is the …………
2) a bear broker whose expectations have gone wrong and makes a loss in dealing is called……….
3) SEBI has the headquarters in…………
*4) A speculator who expects fall in prices of shares ………..
*5) A person who buys or sells shares on behalf of his clients is called as ………..
6) The NSE ( National Stock Exchange of India) was incorporated in the year………….
*7) The largest and most modern stock exchange in India is the ………….
8) SEBI regulates capital markets in…………
9) A small speculator, who quickly judges market trends thereby makes profits is………..
10) The instructions, given by an investor to the broker to buy or sell a security it reaches a certain price is
called…………

ANS. 1) BSE 2) Lame Duck 3) Mumbai 4) Bear 5) Broker 6) 1992 7) National

Stock Exchange 8) India 9) A wolf 10) stop loss

Q.14 SELECT THE CORRECT OPTION FROM THE BRACKETS(ONE MARKS

EACH)
*1) A GROUP B GROUP
1) Regulator of capital market a) …………..
2) ……………… b) Nifty
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 162 - STANDARD 12TH
3) Jobber c) …………..
4) ……………… d) Oldest stock Exchange in the world
*5) Oldest Stock Exchange in India e) …………….
*6) …………….. f) Stock Exchange
(London Stock Exchange, Index of NSE, SEBI, trades in securities in his own name, BSE, Secondary Market)
ANS 1) SEBI 2) Index of NSE 3) Trades securities in his own name 4) London Stock Exchange
5) BSE 6) Secondary Market

Q.15 ANSWER IN ONE SENTENCE(ONE MARKS EACH)

*1) What is Stock Exchange?
Ans. A stock exchange is a place or a platform where investors-individuals, institutions or organization meet to
purchase or sell the securities
*2) Who is jobber?
Ans. A Jobber is a dealer in stock exchange who carries on trading of securities in his own name.
*3) What is SEBI?
Ans. SEBI, is a statutory body under the SEBI Act, 1992 which regulates and controls the activities of the stock
exchanges and protects the interest of investors.
*4) Who is a broker?
Ans. He is a licensed member of stock exchange who transacts business on the behalf of his clients, being an agent
between investors and jobbers
*5) Who is a bull?
Ans. Bull (Tejiwala) is an optimistic speculator who expects the price of a share to rise in the future and buys with the
hope of selling at high price to earn profit.
*6) What is a trading ring?
Ans. The trading of shares that takes place during trading hours on the floor of the stock exchange is called the Trade
Ring

Q.16 CORRECT THE UNDERLINED WORD AND REWRITE THE FOLLOWING

SENTENCES(ONE MARKS EACH)
*1)One of the functions of SEBI is to protect the interest of issuers of securities in the securities market.
Ans. investors of securities
*2) A Broker cannot directly deal with investors.
Ans. Jobber
3) NSE is the oldest Stock Stock Exchange
Ans. BSE
*4) A Bear expects the prices of shares to rise in future.
Ans. Bull
*5) Insider Trading is the practice of buying and selling of securities within the same trading day before close
of markets on that day
Ans. Day Trading
*6) A Bull buys new issues of securities from primary market.
Ans. Stag
7) Sensitive index called as sensex is made up of 50 largest and activity traded stocks of listed companies
Ans. 30
*8) A stock market is an important constituents of money market.
Ans. capital
9) Investors can deal in their securities through a jobber
Ans. broker
10) In India, Bear is known as Tejiwala
Ans. Mandiwala

MAR 2022
TIME-3HOURS MARKS : 80

Note : 1) All questions are compulsory 2) Figures to the right indicate full marks for the questions . 3) Figures
to the left indicate question numbers. 4) Answer to every question must be started on a new page.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 163 - STANDARD 12TH
Q.1) A) Select the proper option from the options given below and rewrite the sentences (5)
1) _____is related to money and money management . a) Production b) Marketing c) Finance
2) Secured debentures must be redeemed within _____ from the date of issue. a) 10 days b) 10 years c) 15 years
3) India has a_____ depository system. a) sole b) Multi c) single
4) Dividend is to be paid to the shareholders within_____ from the date of declaration. a) 30 days b) 40 days c)
20 days
5) Accumulated dividend is paid to _____ preference shares a) redeemable b) cumulative c) convertible

B) Match the pairs (5)

A group B Group
a) Investments in debentures 1) Deals with acquisition and use of capital
b) Financial market 2) must inform stock exchange about dividend declaration
c) Price of the shares mentioned in the prospectus 3) trading of financial securities
d) Corporate finance 4) Safe and secured investment
e) Listed company 5) must inform government about dividend declaration
6) fixed price issue method
7) Risky Investment
8) Trading of commodities
9) Deals with acquisition and use of assets
10) Book Building Method
C) State whether the following statements are true or false (5)
1) Dividend can be paid out of capital 2) Deposit can be accepted for a maximum of 6 months 3) Depository
bank stores the shares on behalf of GDR holder 4) Securities market is an unorganized market place in India
5) Bonus shares are fully paid up shares.

D) Correct the underlined word and rewrite the following sentences (5)
1) Depositors are owners of the company 2) Retained earnings is an external source of finance 3) To rate its
debentures, a company appoints underwriters 4) Companies sell fresh shares for the first time to the public in
secondary market 5) Preference share holders get dividend from residual profits

Q. 2 Explain the following terms / concepts (any FOUR) (8)

1) Production cycle 2) overdraft 3) Employee Stock Purchase Scheme (ESPS) 4) Depository Participant
5) Rate of Dividend 6) Rights Issue

Q. 3 Study the following cases/situation and express your opinion (any TWO) (6)
1) Sunflower limited company proposes to issue debentures to the public to raise funds. After discussion, the
Board of Directors have decided to issue secured, redeemable, non-convertible debentures with a tenure of ten years.
Please advise the Board on following matters.
a) Should the company appoint Debenture trustees?
b) Should the company create a charge on its assets?
c) Can the tenure of debentures be less than ten years?

2) ‘ABC’ Company Ltd. is an eligible public company as per the Companies Act 2013 with reference to
accepting public deposits:
a) Can the company accept deposits in Joint names?
b) Can the company accept deposits from its members?
c) Can the company accept secured deposits?

3) Joy Ltd. company is newly incorporated company. It wants to raise capital for the first time by issuing equity
shares.
a) Should it go to primary market or secondary market?
b) Should it offer its shares through public offer or rights issue?
c) What will be the issue of equity shares by Joy Ltd. company called as –IPO or FPO?

Q. 4 Distinguish Between (any THREE) (12)

1) Fixed Capital And Working Capital 2) Transfer Of Shares And Transmission Of Shares 3) Dematerialization
And Rematerialization 4) Primary Market And Secondary Market

Q. 5 Answer in Brief (any TWO) (08)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 164 - STANDARD 12TH
1) State the features of bond 2) Explain any four advantages of depository system to investors 3) Explain the
features of interest.

Q. 6 Justify the following statements (any TWO) (08)

1) The Board of Directors can refuse transfer of shares 2) The Securities and Exchange Board of India (SEBI) is
the regulator for the securities market in India 3) Unpaid dividend cannot be used by the company 4) A
company can issue duplicate share certificate

Q. 7 Attempt the following (any TWO) (10)

1) Write a letter to the member for the payment of interim dividend electronically 2) Write a letter to the debenture
holder regarding payment of interest through interest warrant 3) Draft a letter of thanks to the depositor of a
company.

Q. 8 Answer the following (any ONE) (8)

1) What is preference share? Explain its types
2) Explain the provisions of Companies Act 2013 for issue of debentures

MAR 2023
TIME-3HOURS MARKS : 80

Note : 1) All questions are compulsory 2) Figures to the right indicate full marks for the questions . 3) Figures
to the left indicate question numbers. 4) Answer to every question must be started on a new page.
Q.1) A) Select the proper option from the options given below and rewrite the sentences (5)
1) Company has to pay _____to government. a) Taxes b) Dividend c) Interest
2) _____ shares are issued free of cost to existing equity share holders. a) Equity b) Right c) Bonus
3) _____ is a proof of title of shares. a) Register of Members b) Share certificate c) Letter of allotment
4) Debenture capital is _____ capital of a company. a) owned b) permanent c) borrowed
5) Dividend is paid first to _____ share holder. a) equity b) preference c) deferred

B) State whether the following statements are true or false (5)

1) Finance is related to money and money management 2) Share certificate is issued for partly or fully paid up
shares. 3) Government company can collect deposits from its members 4) Depositors are given voting rights.
5) Primary market is also known as new issue market.

C) Find the odd one. (5)

1) Face Value, Market value, Redemption Value 2) Convertible debentures, Irredeemable debentures, Secured
debentures. 3) Dividend warrant, Interest warrant Demat 4) DP, RBI, Depository 5) Final Dividend,
Interim Dividend, Interest

D) Select the correct option from the bracket. (5)

Group A Group B
a) Equity shares 1) ________
b) Operation of Law 2) ________
c) __________ 3) Debenture Certificate
d) Dematerialisation 4) _________
e) __________ 5) Oldest stock exchange in India
(Issued within 6 months of allotment, Physical to electronic mode, Fluctuating rate of dividend, Bombay Stock
Exchange, Transmission of shares)

Q. 2 Explain the following terms / concepts (any FOUR) (8)

1) Working capital 2) overdraft 3) Rights Issue 4) Depository Participant(DP) 5) Secondary Market 6)
Stock Exchange

Q. 3 Study the following cases/situation and express your opinion (any TWO) (6)
1) Sai Ltd. Company is newly incorporated public company and wants to raise capital by selling equity shares to
the public. The Board of Directors are considering various options for this. Advise the Board on the following
matters :
a) What should the company offer –IPO or FPO? B) Can the company offer Bonus shares to raise its capital? C)
Can the company enter into underwriting Agreement?
NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 165 - STANDARD 12TH

2) Mr. Kishore wants to demat his 25 shares of Hero Company Ltd. Bearing certificate no. 100 and distinctive No. 76-
100 :
a) Which form is he required to fill as a written request to the DP-DRF or RPF? B) Does he have to fill
instrument of transfer if he wishes to transfer the same, after demat? C) Does he have to quote certificate number
and distinctive number, if he wishes to transfer his shares after it is in demat form?

3) DIAMOND Co. Ltd. is considering to declare Interim Dividend.

A) In how many days of declaration it should transfer the funds to Dividend Account ?
B) In how many days it must pay it to shareholders?
c) Can the Board of Directors declare Interim Dividend out of capital?

Q. 4 Distinguish Between (any THREE) (12)

1) Fixed Capital And Working Capital 2) Shares And Debentures 3) Initial Public Offer (IPO) and Further Public
Offer (FPO) 4) Final Dividend and Interim Dividend

Q. 5 Answer in Brief (any TWO) (08)

1) State the contents of Share certificate 2) Explain the four advantages of depository system for an investor 3)
State the functions of SEBI.

Q. 6 Justify the following statements (any TWO) (08)

1) A company can issue only certain types of debentures 2) All companies cannot accept deposits from public. 3)
Equity shares get last priority in payment of dividend 4) Capital market is useful for corporate sector.

Q. 7 Attempt the following (any TWO) (10)

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

Q. 8 Answer the following (any ONE) (8)

1) What is an equity share? Explain its features.
2) Explain the statutory provisions for allotment of shares.

MAR 2024
TIME-3HOURS MARKS : 80

Note : 1) All questions are compulsory 2) Figures to the right indicate full marks for the questions . 3) Figures
to the left indicate question numbers. 4) Answer to every question must be started on a new page.
Q.1) A) Select the proper option from the options given below and rewrite the sentences (5)
1) Finance is the management of __________affairs of the company. a) Monetary b) Marketing c) Production
2) Company can accept deposit from public, minimum for ____ months. a) nine b) six c) Twelve
3) A company can issue _____ convertible debentures. A) Only partly b) Only fully c) Partly or fully
4) Debenture capital is a _________ capital of a company a) Borrowed b) owned c) c) permanent
5) _________ is a return paid to creditors by the company a) Dividend b) Interest c) Rent

B) Match the pairs . (5)

Group A Group B
a) Capital budgeting 1) Unsecured Debentures
b) Regret letter 2) 1956
c) Board of Directors 3) Investment Decisions
d) Depository Act 4) Allotment of shares
e) Final Dividend 5) Decided and declared by Board of Directors
6) Financing Decisions
7) Decided by Board and Declared by members
8) 1996
9) Power to issue debentures
10) Non Allotment of shares

C) Find the odd one. (5)

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)
SECRETARIAL PRACTICE - 166 - STANDARD 12TH
1) Debentures, Public Deposit, Retained earnings 2) Bonus shares, Right Shares, Employees Stock Option
Scheme, 3) Private company, Non Eligible Public Company, Government Company 4)Depository, D.P., RBI
5) Private Placement, Commercial Paper, Further Public Offer

D) Correct the underlined word and rewrite the following sentences (5)
1) Owned capital is a temporary capital 2) FPO refers to offering of shares to the public for the first time.
3)Dividend is recommended by shareholders 4) Deposit is a long term source of capital 5) A stock market is an
important constituent of money market.

Q. 2 Explain the following terms / concepts (any FOUR) (8)

1) Fixed capital 2) Borrowed capital 3) Bonus shares 4) Depository System 5) Secondary Market 6)
Stock Exchange

Q. 3 Study the following cases/situation and express your opinion (any TWO) (6)
1) Violet Ltd. company plans to raise Rs 10 crores by issuing debentures. The Board of Directors have some
queries. Please advise them on the following
A) Can the company issue convertible debentures?
B) As the company is offering debentures to its members, can such debentures have normal voting rights ?
C) Capital raised by issuing debentures will be owned capital or borrowed capital?

2) Mr. Z holds 100 shares of Peculiar Co. Ltd. in Physical mode and wishes to convert the same in electronic
mode :
A) Mr. Z holds a Saving Bank Account with CFDH Bank Ltd. Can he deposit his shares in this account for demat ?
B) What type of account is needed for the same ?
C) Is it the RBI which will be the custodian of shares of Mr. Z after demating ?

3) GOLD Co. Ltd. declares a dividend of ` 10/- per share for F.Y. 2018-19.
A) Is company under default, if dividend was not paid within 30 days of its declaration ?
B) Is company right in transferring the unpaid dividend to its Debenture Reserve Account ?
C) Does the company have to transfer the amount of unpaid dividend to IEPF after 30 days ?

Q. 4 Distinguish Between (any THREE) (12)

1) Fixed Capital And Working Capital 2) Right Shares And Bonus shares 3) Dematerialisation and
Rematerialisation 4) Dividend and Interest

Q. 5 Answer in Brief (any TWO) (08)

1) Explain Employee stock Option Scheme 2) State any four terms and conditions regarding acceptance of deposits
3) Explain the features of Interim Dividend.

Q. 6 Justify the following statements (any TWO) (08)

1) Bond holder is a creditor of the company 2) A company has to create charge on its assets for issuing secured
debentures 3) Capital market is useful for corporate sector 4) Stock exchange works for the growth of the Indian
Economy.

Q. 7 Attempt the following (any TWO) (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 renewal
of his deposit

Q. 8 Answer the following (any ONE) (8)

1) What are preference shares? Explain its types in detail
2) Explain the provisions of Companies Act 2013 for issue of debentures.

NOTES BY: PROF. ADV. ADITYA SINALKAR (MOBILE NO. 9423478524, 8380092791)
( M.COM.(COSTING), D.T.L., G.D.C.A., P.G.D.B.M.,LL.B.,M.B.S. (FINANCE), B.S.P.)