SHARE CAPTTAL AND DEBENTURES 185

Manner of Appoin ting any person as a nominee of a minor |Section 72(4)] : Where
the nominee is a minor, it shall be 1lawful for the holder of the securities, making the
nomination toappoint, in the prescribed manner, any person to become entitled to
une
securities ot the company, in the event of the death of the nomince during his minority.

Exercise and Hints

A. Multiple Choice Questions (MCQs)
1. The capital with which the company is registered is called the
a) Registered capital (b) Authorised capital1
(c) Nominal capital (d) All of these
2. The capital which is authorised by the Memorandum of Association of a company
(a) is called the Authorised or Nominal capital of the company
b) to be the maximum amount of share capital of the company
(c) both (a) and (b)
(d) none of these
3. The capital which the company issues from time to time for subscription is called
(a) Nominal capital1 (b) Issued capital
(c)Subscribed capital (d) None of these
4. The part of the capital which is for the time being subscribed by the members of a company
is called-
(a) Nominal capital b) Issued capital
c)Subscribed capital (d) Paid-up share capital
5. The part of the capital which has been called for pay ment is defined as
a) Nominal capital b) Called-up capital
C) Paid-up capital (d) Subcribed capital
6. The paid-up share capital' means-
such aggregate amount of money credited as paid-up as is equivalent to the amount received as
(a)
paid-up in respect of shares issued
credited paid-up in respect of shares of the company
(6) any amount as

(c) both (a) and (b)

(d) None of these
'Share' means a share in the share capital of a company and
7.
According to Section 2 (84),
includes
(b) Bonds
(a) Debentures
(d) Negotiable Instrument
()Stock
8. The shares in a company a r e

(a) the immovable property of the company

(6) the movable property of the company but transferable
provided by the Articles of the
transferable in the manner
e movable property of the company

company
(d) none of the above
186CoMPANYLAW

9. The term 'stock' may be defined as-

(a)the aggregate of fully-paid up shares legally consolidated

(b) the portion of which aggregate may be transferred or split up into fraction of any amount without

regard to the nominal amount of shares

()both (a) and (b) in above

(d) none of the above
10. A stock is created in a process whereby a company limited by shares may, if authorised by its

articles
(a) convert all any of its fully paid-up shares into
or stock
(b) reconvert that stock into fully paid-up shares of any denomination as per section 61

(c) both (a) and (b) in above

d) none of the above
11. Which of the following statements is true?
(a) A stock has no nominal value
b) A stock is always fully paid-up

()A stock may be transferred in any fractions

) All of the above
12. The share capital of a company limited by shares shall be o f
(a) Equity share capital (6) Preference share capital
(Debt capital () Both (a) and (b) in above
13. The preference share capital of company limited by shares means that part of the issued share
capital of the company which carries or would carry a preferencial right
(a) as to the payment of dividend (b) as to the repayment of capital
both () and (6) d) none of the above
14. The preference shares of a company may be of the-
() Cumulative and non-cumulative preference shares
(b) Participating and non-participating preference shares
() Convertible and non-covertible preference shares
(d) All of the above
15. The preferencedividend may be paid at a fixed rate on
(a) Nominal value of shares b) Market value of shares
Either (a) or (b) (d) Both (a) and (b)
16. The 'cumulative preference shares' are those which are assured
(a) the dividends every year even if there are no profits in a
particudar year
(b) the unpaid dividend of such shares is treated as arear and is carried
forward to the subsequent y rs
() the unpaid dividend goes on accumulating and is paid when there are suffricient the
subsequent years prolits
(d) all of the above.
 SHARE CAPITAL AND DEBENTURES 187

by shares may, if so authorised by its Articles, issue preference shares which

panylimited by
17. A company redeemed wit
within a period not exceeding
redeemed

fo be
liable
are b) 15 years
(a) 10 years

d) 25 years
(e) 20 years

ed
limit by shares may issue preference shares for a
period exceeding 20 years only-
c o m p a n y

A purchase of fixed assets

18. of
for the
purpose

payment of liability
)for the
purpose of
of financing infrastructure project
for the
purpose
(c) of raising capital of the company
d) for the p u p o s e
r o m p a n y limited by shares may 18sue equiy shares with differential rights i f the

of Association of the company shall have to authorise the issue of shares with differential
a)
nghts
issue of such shares is authorised by an ordinary resolution passed at the general meeting of the
shareholders

company has not defaulted in payment of the dividend on preference shares or repayment of any
term loan from bank

)all of the above

20. Equity shares with differencial rights shall not exceed-
@20% of the total post-issue paid-up equity share capital
(b) 25% of the total post-issue paid-up equity share capital
C) 26% of the total post-issue paid-up equity share capital including equity shares with differential
rights issued at any point of time
) either (a) or (b)
21. Which of the following statements is true ?

a A certificate, issued under the common seal of the company, specifying the shares held by any
person
(b) A certificate of shares shall be prima facie evidence of the title of the person to such shares

CWhere share is held in depository form, the record ofthe depository is the
a prima facie evidence
of the interest of the beneficial owner
)All of the above
22.
A duplicate certificate of shares may be issued, if such cerfificate
4 18
proved to have been lost or destroyed,
(6) has been
defaced, mutilated or tom, and is surrendered to the company
cither (a) or (b)
d) both
23. Acompany(a) and (b) in above
replace all the existing certificates by new certificates upon
1:
asub-division
6)
merger
or or
consolidation of shares
any demerger of company
company
(d) eithereconstitution without requiring old
)either (a) certificates to be surrendered
or
(b) or ()
188 CoMPANY LAW

24. Every member ofa company holding any preference share capital therein shall, in respect of
such capital, have a right to vote-
a)only on resolution placed before the company which directly affect the rights attached tohis
preference shares
(b) only on any resolution for the winding up of thc company or for the repayment or reduction of
its preference share capital
(c)both (a) and (b) in above
d) either (a) or (b)
25. According to Section 48(1), where a share capital of the company is divided into different classes
of shares, the rights attached to the shares of any class may be varied
(a) if provision with respect to such variation is contained in the Memorandum or Articles of the

company
(b)with the consent in writing ofthe holders of not less than three-fourths of the issued shares of
that class
c) by means of a special resolution passed at a seperate meeting of the holders of the issued shares
of that class.
(d) both (a) and (5) or )
26. Where the holders of not less than 10% of the issued shares of a class did not consent to variation
of rights they may apply t o
(a) the Central Government for cancellation of variation of shareholders rights
(b) the Tribunal for cancellation of variation of shareholders right
(the Tribunal within 21 days after the date on which the consent was given or the resolution was

passed

(d) both (b) and (c)

27. The company shall file a copy of the order of the Tribunal regarding variation of shareholder
rights with the Registrar of companies within
(a) 15 days of the date of the order of the Tribunal
(b) 30 days of the date of the order of the Tribunal
(c60 days of the date of the order of the Tribunal
(d) 90 days of the date of the order of the Tribunal
28. Where any default is made in complying with the provisions of variation of shareholders righis,
the company shall be punishable with fine
a) which shall not be less than Rs. 25,000
(b) which shall not be less than Rs. 50,000
()which shall not be less than Rs. 25,000 but which may extend to Rs. 5,00,000
(d) both (a) and (b) in above
48
29. Every oficer of the company who is in default in complying with the provisions of Secton
shall be punishable
(a) with imprisonment for a term which may extend to 6 months
(b) with fine which shall not be less than Rs. 25,000 but which may extend to Rs. 5,00,
(c) both () and (6)
(d) either (a) or (b) or (c)
 SHARE CAFTTAL AND DEBENTURES
189
h i t sArticles, a company may accept from any member_
30. I fa u t h o r i s e d

amaining unpaid on any shares held by him, even if no

he who part of that amount
(a) called up
been
has
part ofthe amount remaining unpaid on any shares held by him, even if no part of that amount
(b) been
called up
has

(a)
and (b)
)both

either (a) or (b)

d)
issues shares at a premium, whether 1or cash or
a n y issues
Where
the
a company

aggregate amount of the premium ofherwise,

ceived on those shares shall
a sum
be transferred equal
to a to

Premium Account (b) Securities Premium Account

(a) Share
on Shares Account (d) Reserve on Issue of Shares
()Premium
The Securities Premium Account may be applied by the company

towards the issue of unissued shares of the

company to the members of the company as full
paid bonus shares

b) in writing off preliminary expenses of the company

)in writing off the expenses of, or the commission

paid or discount allowed on,
any issue of shares
or debentures of the company

()all of the above

33. The Securities Premium Account may not be used by the
company
(a) towards the issue of unissued shares of the company to the members of
paid bonus shares the company as
partly
(b) in providing for the premium payable on the redemption of any redeemable preference shares
of any debentures of the company or

) for the purchase of its own shares or other securities under section 68
d) all of the above
S4. Which of the
following statements is true ?
Company shall not issue shares at a discount except provided in section
Equity Shares) as 54 (lssue of Sweat
9Any share issued
by a
discounted price shall be void
company at a
CWhere a pany
compa: contravences the provisions of this section 53 shall be punishable with fine
n o t be less than Rs. 1,00,000 but which may extend to Rs. 5,00,000
d) All of the
35. Every above
bebe punishable-
icer of the company who is in default in complying with provisions of section 53 shall
(a) with
b) with imprisonment
fine whi
for a term which may extend to 6 months
) both vhich shall not be Rs. 5,00,000
less than Rs. 1,00,000 but which may extend to

(d)
() and (b)
either (a) or
(b) or
C)
190CoMPANY LAw

36. The 'Sweat Equity Shares' are issued by the company t o

a) a permanent employee of the company who has been working in India or outside India for at
least one year

(b) director of the company whether whole-time director or not

C)employee or director of a subsidiary in ndia or outside India or of a holding company of the

company
(d) all of the above
37. The Sweat Equity Shares are issued by the company to its employees or directors

(a) at a discount (b) for a consideration other than cash

both ) and (b) (d) either (a) or (b)

38. The Sweat Equity Shares are issued to the employees or directors
(a) for providing know-how to the company
6) for making available to the company the rights in the nature of intelletual property or value
additions

()both (a) and (6) in above

() either (a) or (b)
39. The Sweat Equity Shares to be issued by the Company should be of that
a) class of equity shares which the company has already issued
b) class of equity shares which the company has not issued
(c) class of equity shares which the company has issued first time
(d) both (b) and (c) in above.
40. A company may issue Sweat
Equity Shares to its employees or directors on fulfilment of
conditions
(a) The shares should be of a class of shares already issued and not a new class of shares

(b) The issue is authorised by special resolution passed by the

company in the general meeting
() The resolution must specify the umber of shares, the current market
price, consideration, if any
(d) all of the above
41. The resolution
authorising the issue of Sweat Equity Shares should specify the particulars
(a) the number ofshares, the current market price of shares
b) consideration, if any, for which such shares are to be issued
(C)the class or classes of directors or employees to whom such equity shares are to be issued
(d) all of the above
42. A
company may issue sweat equity shares to its directors or employees
(a) within a period of 12 months on which the company had commenced bus1ness
9 not leas than one year has elapsed since the date on which the company had commenced business

Iess than 2
no years has elapsed since the date on which the company had commenced business
(d) either (a) or ()
 SHARE CAPITAL AND DEBENTURES 191

shall not iss

issue sweat equity shares
company

43.
The an
than 15% of the existüng paid-up equity share
15%%
capital in a
more year
a) for of the
issue value of Rs. 5 crores
shares

or (b), whichever is higher

ther (a)
in above
both (a) and (b)
(d) of sweat equity shares in the company shall not exceed
issuan
The
44. 20% of the paid-up equity capital of the company at any point of time
25% of the paid-up equity capital of the company at any point of time
(b)
(C) 30%% of the paid-up equity capital of the company at any point of time

none off the above

(d)
Sweat Equity Shares issued to employees or directors of a company shall be locked in for a
period o f f

form the date of allotment of shares

(a) 3 years
from thee date of allotment of shares
b) 2 years
)5 years from the date allotment of shares
of
date of allotment of shares
d) 12 months from the
A6. The special resolution authorising the issue of Sweet Equity Shares shall remain valid for making
allofment of such shares
(a) within a period of not more than 10 months from the date of passing special resolution
)within a period of not more than 12 months from the date of passing the special resolution
(within a period of not more than 15 months from the date of passing the special resolution
of these
(d) none
47. The Sweat Equity Shares to be issued in accordance with the regulations made by the SEBI
in this behalf and if the equity shares of the company a r e
a) not listed on a recognised stock exchange
(b) listed on a recognised stock exchange
either (a) or (b)
(d) none of the above
43. The holders of Sweat Equity Shareholders shalk

(a) rank pari passu with other equity shareholders

b) not rank pari passu with other equity shareholders
to
the restrictions and provisions as are for the time beng applicable
Cyoy rights, limitations,
equity shareholders
)both (a) and (c) in above
49. Which of the following ements is true ? shall issue
2013 no company
limited by shares
commencement of the Companies Act,
anv
ny preference shares which are irredeemable infrastructural project may
issue
b) AA company
(6) with of
any engaged in the setting up and dealing
company
Preferene
prefere the ding 20 years,
years, but not exceeding
30 years
of
1 a r e s for a period exceeding
D has a period
been paid
not been for
()Where
2
the dividend in respect of a class of preference
shares has not
to vote on all
Polutions
resolutions placed
placed
shareholders have a right
years or
years or
more, such class ofpreference
before the company
(d) All of the
above
192COMPANY LAw
excecding 20 yenrH
for »pecified infrandrue
Iwwue preferenee
shares for a perkod
can
50. A conpany
fure projeetn, sulbjeet to umunl basis at
he oplion of nuchh prcserCnee
on n
of oerlain percentago
(n) the rodomption
shuroholders
of 10%% on n amnl basis
(b) the redemption
15% on nn mnual bsis
(o) the redemption of slharcholders
the option of such prcscrence
the redemption of 25% on n annual basis al
(d)
shares can be redeemed-
51. The redeemable prefcrence
() only if the shares aro fully pmid-up woud otherwiso be
available for dividend
the company which
(b) only oul of the profits of of such rodemption
issue of shures for the purpose
(c) only out of the fresh
d) both (a) and (b) or () redeemable preference whare,
it must be paid-
52. If the premium is payable on redueption of

(a) out of the profits of the company

oul of the compuny's Secwities Premium Account
(b)
the profits sale of fixed assets of the company
(c) oul of on

(d) either (a) or (b) shares

to the nominal amount of
53. If the shares redcemed out of profits, then the sum equal
are
called-
the reserve fund which is
paid on redemption must be transferred to
(a) Capital Redemption Reserve Account (b) Capital Reserve Account
() Securities Premium Account (d) CGeneral Reserve Account
Reserve Account may be applied by the company
54. The amount of capital Redemption
of the company to be issucd to the members of the company
(a) in paying up unissucd cquity shares
as parlly paid bonus shares
be issued to the members of the company
(b) in paying up unissued equity shares of the company to
as fully paid bonus shures

()in writing off preliminary cxpenses of the company

off the commission paid on issue of shares or debentures
(d) in writing
55. Where a company is not a position to redeem any prefcrence shares or to pay dividend, if any,
on such shares (unredeemed shares) in accordance with the terms of issue, the company may
issue further redeemable preference to redeem the unredeemed shares, and to pay dividend on
such preference shares, subject t o

(a) Consent of threc-fourths in value of such preference shares

(b) Approval of the National Company Law Tribunal

) Approval of the Central Govermment
(d) Both (a) and (b) in above
56. A company shall not register a transfer of seeurifies of the company, unless a proper instrument
of transfer, in such form as may be preseribed
(a) duly stamped, dated and exccuted by or on behalf of transferor and transferce;
b) specifying the name, uddress and occupation, if uny, of the transferee
() duly delivered to the company by the transferor or transferec within a period of 60 days from
the dale of execution along with the certificate of securities
(d) all of the above
 SHARE CAPITAL AND DEBENTURES 1 9 3

57. Every company shall, unless prohibited

or otherauthority deliver the certificatebyofany provision of law or any order of court, Tribunal
securities allotted, transfer, or transmifted
(a) Within a period of 2 months from the
date of
memorandum incorporation, in the case of subscribers to be
(b) Within a period of 2 months from the
shares date of allotment, in the
case of allotment of
any of its
(c) Within a period of 6 months from the date
of allotment, in the case of
(d) all of the above any allotment of debentures
58. The transmission of shares occurs
by operation of law
(a) When the registered shareholder dies
b) When the registered shareholder is
(c)When the adjudicated as an insolvent
shareholder is a
company which goes into
(d) All of the above cases liquidation
59. A company shall not
register transfer ofa
(a) the company has given a notice in Form partly paid shares, unless
No. SH. 5 to the transferee
b) the transferee has given no
notice
objection to the transfer within 2 weeks from the date of receipt of
(C)both (a) and (b)
(d) either (a) or (b)
60. A limited
company having a share capital may, if so authorised by its Articles, alter its
Memorandum in its general meeting to-
(a) increase its authorised share capital
(b) consolidate and divide all or any of its share
shares
capital into shares of a larger amount than its existing
(c) sub-divide shares into shares of smaller denomination or cancel shares which
have not been taken
by any person
(d) either (a) or (b) or (c)
61. Any consolidation and division of share capital by companies which results in change in thhe
vofting percentage of shareholders, shall require--
a)the prior approval of the Tribunal (b) the prior approval of Court
the prior approval of Central Government (d) both (6) and ()
62. The cancellation of shares under section
61(1) shall-
(a) be treated as reduction of share capital
6) not be deemed to be a reduction of share capital
)either (a) or (b)
d) none of the above
5. A company having a share capital can increase its subscribed capital by the issue of further

shares
(a) to its existing members by sending a letter of offer
employees through employees stock option, subject to approval by special resolution
valuers
to the general public, after having the shares valued by registered
d) both (a) and
(b) or ()
C. Law(l1)- 13
194CoMPANYLAw
64. A company having a share capital can increase its subscribed capital by the issue of further
shares fo its existing members by sending a letter of offer

(a) at least 3 days prior to the opening to the issue

b)specifying the umber of shares offered offer

(c)limiting a time of 15 days to 30 days from the date of the
(d) all of the above
65. Where a company alters its share capital or redeems any redeemable preference shares, the
company shall file a notice in the prescribed form
with the Registrar-
(a) within a period of 20 days of such alteration or redemption
(b) within a period of 30 days of such alteration or redemption
(c)within a period of 60 days of such alteration or redemption
(d) within a period of 90 days of such alteration or redemption
66. Where the terms and conditions of conversion of debentures issued or loan from Government
into shares in the company are not acceptable to the company, it may, withing-from the date
of communication of such order, appeal to the-
(a) 30 days, court (b) 60 days, Tribunal
()90 days, Central Govemment (c) 120 days, Tribunal
67. A company, other than a listed company, shall offer shares to its employees under the "Employees
Stock Option Scheme' i f
(a) approved by the shareholders by special resolution in the general meeting
(b) approved by the shareholders by ordinary resolution in the general meeting

(c) approved by the Board of Directors in the general meeting

(d) of the above
none
68. The Employees Stock Option Scheme would be open
or outside in India
(a) to all pemanent employees whether working in India
b) to the directors of the company; whether a whole time director
or not

(c) to the promoters and large shareholders of the company

d) both (a) and (b)
69. The amount, if any, payable by the employees, at the time grant of employees stock option-
if the option is not exercised
(a) may be forfeited by the company
conditions
(b) the amount may be refunded if the options are not vested due to non-fulfilment of
()both (a) and (b)
d) either (a) or (b)
70. Which of the following statements is true regarding ESOS?
(a) There shall be a minimum period of one year between the grant of options and vesting of option

6) The company shall have the freedom to specify the lock-in-period

)The option shall not be transferable or pledged, hypothecated or mortgaged to any other person
(d) all of the above
71. The company shall maintain a Register of Employees Stock Options i n
a)Fom No. SH 3 6) Form No. SH 4
)Fom No. SH 5 (d) Form No. SH 6
 SHARE CAPITAL AND DEBENTURES 195

72. When bonus shares allotled to

are
members, they are
required
pay- to
(a) The market price of shares
(b) The book value of shares
(c) The face value of shares
(d) None of the above
73. A company may issue fully paid-up bonus shares to its members out of the
(a) Free Reserves
6) Securities Premium Account
() Capital Redemption Reserve Account (d) All of the above
74. Which of the following shall not be treated as 'free reserves'
(a) Any amount
representing unrealised gains
(b) Any amount representing notional gains
(c) Any amount representing profit on revaluation of assets
d) All of the above
75. Which of the
following
statements is true ?
(a) No bunus shares shall be issued by
capitalising reserves created by the revauation of assets
(b) Bonus shares are issued by a company to its
existing shareholder at free of cost on prorata basis
The partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up
(d) all of the above
76. A company shall not
capitalise its profits or reserves for the purpose of
issuing bonus shares
unless
(a) it is
authorised by its Articles of Association of the
company
(b) it has, on the recommendation of the Board, been authorised in
general meeting of the company
(c) it has no default in payment of interest
by it
or
principal of fixed deposits or debt securities issued

(d) all of the above

77. Which of the
following statements is true?
(a) The company which has once announced the decision of its Board
shall not subsequently withdraw the same
recommending a bonus issue,
(b) The bonus shares shall not be issued in lieu of dividend
c) A company may issue bonus shares if it has not defaulted in
dues of the respect of the payment of statutory
employees
d) all of the above
78. According to the SEBI
of
guidelines, the issue of bonus shares should be made
within a
period
(a) 3 months from the date of approval of the Board of Directors
(b) 6 months from the date of approval of the Board of Directors
)12 months from the date of approval of the Board
of Directors
(d) 30 days from the date of approval of the Board of Directors
79. The
Companies Act, 2013 allows a
company to re-convert its stock into
(a) Fully paid-up equity shares 6) Partly paid-up equity shares
() Unpaid equity shares (d) Uncalled shares
196+CoMPANY LAW

be re-issucd by a company by way of passing

80. Forfeited shares can

resolution at the general mecling

(a) An ordinary
resolution at the general mecting
(b) A special
(c) A Board resolution

(d) None of the above

transfer of shares-
81. Find the odd one out of the following types of
of law
(a) Transnmission of shares
(b) Transfer of sharcs by operation
() Involuntary assignment of
shares (d) Voluntary transfer of shares
his shares, failed to pay the call, the
82. If a shareholder, having been called upon to pay call on
viz
company has remedies against the shareholders,
amount due
(a) it may bring legal action for the
a resolution of the
Board
(b) it may forfeit his shares by passing
clear cut power to that effect in the Articles of Association
(c) it may forfeit the shares if there is
(d) all of the above
at any time thereafter serve a notice on
83. If a shareholder fails to pay any call, the Board may,
him requiring payment of call alongwith the interest. While serving notice on defaulting

shareholder which point must be kept in view-

of the amount due on calls
(a) The notice must give at least 14 days time for payment
that in the event of non-payment within the period
6) The notice should clearly wam the shareholder forfeited
fixed in the notice, the shares will be liable to be
from the shareholder
() The notice should also specify the exact amount due
(d)all of the above
is
84. The procedure for reduction of share capital
confimmation of the Tribunal,
(a) by passing a special resolution and obtaining
of the Central Government
(b) by passing an ordinary resolution and approval
Tribunal
)by passing an ordinary resolution and approval of the
of the Central Govemment
(d) by passing a special resolution and approval
85. Subject to confirmation by the Tribunal, a company may reduce its share capital by a special
resolution in order to-
share in respect of the share capital not paid-up
a) extinguish or reduce the liability on any of its
available assets
b) cancel any paid-up share capital which is lost or is unrepresented by
of the wants of the company, alter its
) pay-off any paid-up share capital which is in excess
memorandum by reducing the amount of its share capital and of its shares accordingly
(d) either (a) or (5) or ()
diminution of share capital is not regarded as reduction of capital ?
86. Which of the following cases

have not been taken

(a) According to Section any company which cancels shares which
61(1) (e),
or agreed to be taken by any person

As per Section 55, where the redeemable preference shares are redeemed
in accordance witn
b)
(c)Where any shares are bought back under Section 68

(d) All of the above cases

 SHARE CAPITAL AND DEBENTURES197

87. The reduction of share capital

take place without confirmation
can
by the Tribuna
(a) in case shares are surrendered to the company, whether by way of settlement of a dispute or for
any other reason
(b) in case of redemption
of redeemable
preference shares
(c) in case of purchase of shares of a company by another company or buy-back of shares
(d) all of the above cases
88. No reduction of capital
is allowed if the
company i s
(a) in arrears in the repayment of
any deposits accepted by it
b) in arears in the payment of interest on
deposits accepted by it
both ) and (b)
(d) either (a) or (b)
89. The company shall deliver to the
Registrar a certified copy of the order of the Tribunal
confirming reduction of share capital and of the minutes approved by the Tribunal
showing-
(a) the amount of share capital
(b) the number of shares into which it is to be divided
(c)the amount of each share and the amount, if any, at the date of registration to be paid-up on each
share
(d) all of the above
90. A copy of the order of the Tribunal
confirming the reduction of share capital is to be filled
with the Registrar of companies within
(a) 20 days of the receipt of the copy of the order
b) 30 days of the receipt of the copy of the order
(c) 60 days of the receipt of the copy of the order
d) 90 days of the receipt of the copy of the order
91. Any officer of a company, involves in the process of capital reduction, shall be liable under
section 447 (fraud) if he
knowingly conceals the name of any oreditor entitled to object to the reduction
(6) knowingly misrepresents the name or. amount of the debt or claim of any creditor
(abets or is privy to any such concealment or misrepresentation as aforesaid
d) both (a) and (b) or ()
92. According to Section 68(1), a company may purchase its own shares or other specified securities
(Buy-back) out o f
(a) its free reserves
(b) the securities premium account

(c)the proceeds of the issue of any shares or other specified securities

) both () and (b) or (o)
93. The legal provisions relating to buy-back of securities are contained in-

(a) Section 58 (b) Section68

(d) Section 78
)Section 69
198 COMPANY LAW

94. No buy-back of any kind of shares or other specified securities shall be made
(a) out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified
securities
(b) Unless all the shares or other specified securities buy-back are fully paid-up
()both (a) and (b)
(d) either (a) or (b)
95. The Board of Directors may authorise the
buy-back
)Where the buy-back is 10% or less of the total paid-up equity capital and free reserves of the
company
(6) Where the buyback is 10% or in excess of the total paid-up equity capital and free reserves of
the company
Where the buy back is in excess of the total paid-up equity capital and free reserves ofthe company
(d) either (b) or ()
96. A company shall purchase its own shares or other specified securities in excess of 10% of the
total paid-up equity capital and free reserves of the company, i f
the buy-back is authorised by its Articles
of Association
(b) a special resolution has been passed authorising the buy-back
)both (a) and (b)
(d) either (a) or (b)
97. The maximum buy-back will b e
(a) 25% or less of the aggregate of paid-up capital and free reserves of the company
b) 20% or less of the aggregate of paid-up capital and free reserves of the company
(o)15% or less the aggregate of paid-up capital and free reserves of the company
(d) 10% or less of the total paid-up equity capital of the ocompany
98. After buy-back, the Debt-Equity Ratio of the company can not be greater than

(a) 2:3 (b)2:4

() 2:1 (d) 2:5
99. The buy-back may be made
(a) from the existing shareholders or security holders on a proportionate basis
(b) from the open market
c)by purchasing the securities issued to employees under stock option or sweat equity
all of the above
(d)
100. No offer of buy-back shall be made within a period of-from the date of closure of the proceeding
offer of buy-back, if any
(a) 3 months (b) 6 months

()10 months (d) 1 year

Every buy-back shall be completed within a period of-from the date of passing of the specia
01
resolution, or by the Board
(a) 3 months 6) 6 months

10 months (d) 1 year

 SHARE CAPITAL AND DEBENTURES199

102. The notice of the meeting at which thespecial resolution in respect of buy-back of equity shares
is proposed to be passed shall be
accompanie by an explanatory statement stating-
(a) a full and complete disclosure of all material facts and the
necessity for the buy-back
b) the class of shares or securities intended to be
purchased
under the buy-back
(c)the amount to be invested under the
buy-back and the time limit for completion
(d) all of the above
of buy-back
103. After completion of buy-back operation, the securities must be
destroyed within- extinguished and physically
(a) 30 days
b) 15 days
7 days (d) 21 days
104. As per Section 69, where a
company purchases its own shares out of free reserves or securities
premium account a sum equal to the nominal value of the shares
to the purchased shall be transferred
a) Profit and Loss Account
(b) Capital Reserve Account
(c) Capital Redemption Reserve Account (d) General Reserve Account
105. No company shall
purchase its own shares or other specified securities
a) through any subsidiary company including its own subsidiary companies,
b) through any investment company or group of investment
companies
(c) if a default is made by the company, in the
repayment of
redemption of debentures or preference shares or payment ofdeposits,
interest payment thereon,
dividend to any shareholders
) both (a) and (b) or (o)
106. Which of the
following statements is not true ?
(a) A company can purchase its own shares or other specified securities if the
authorised by company's articles only buy-back is

(b) The buy-back can be of the fully paid-up shares only

(c)The shares bought back must be physically destroyed by the company within 7
completion of buy-back days of the
(d) The buy-back of equity shares in any financial year should not exceed 10% of
paid-up equity capital in that financial year company's total
107. A company shall, after the completion of the buy-back, file with the
a retum
Registrar and the SEBI
containing such particulars relating to the buy-back within
a) 30 days of such completion (b) 60 days of such completion
)90 days of such completion (d) 120 days of such completion
108. Any return containing particulars of buy-back shall not be filed with the SEBI by a
company
whose
shares are listed on any recognised stock exchange
(6) shares are not listed on any recognised stock exchange
shares are issued to employees under ESOS
(d) none of the above
200CoMPANYLAW
109. A declaration of solvency has to be filed by the eompany to the Registrar and SEBI before the
buy-back is proposed and signed by-
(a) at least 2 directors including the Managing Director
(b) at least 3 directors including the Managing Director
()at least 4 directors including the Managing Director
d) at least 5 directors including one Independent Director
110. After completion of buy-back, a company shall not make any further issue of the same kind
of shares or securities within a period of 6 months excopt
(a)by way of a bonus issue (6) by way of issue of sweat equity shares

Cby way of ESOS (d) all of uhe above

111. After completion of buy-back a return has to be filed with the ROC and SEBI (in case of listed
companies) within-

a)15days b) 30 days

)60 days (d) 90 days

112. For the purpose of buy-back under Section 68, free reserves includes
(a) Securities premium account (6) Capital reserve account
(c) Profit on revaluation of assets (d) All of the above
113. purpose of buy back under section 68 and section 70, the term 'specified securities
For the
includes
(a) Employees' Stock Option,
b) Other securities as may be notified by the Central Govemment from time to time;
)Both (a) and (b)
(d) Either (a) or (b)
114. If any company makes any default in complying with the provisions of buy-back under section
68 or any regulation made by the SEBI, the company shall be punishable with fine which shall
not be less than
a) Rs. 1,00,000 (b) Rs. 3,00,000
Rs. 1,00,000 up to Rs. 3,00,00o (d) Rs. 5,00,000
115. Every officer of the company who is in default in complying with the provisions of section 68
shall be punishable with

(a) imprisonment for awhich may extend to 3 years

term
6) fine which shall not be less than Rs, 1,00,000 but which may extend to Rs. 3,00,000
(c)both (a) and (b)
(d) either (a) or (b) or ()
ied
1l6, A company shall not buy-back its shares or securities in case the companics have not compled
with the provisions o f
(a) Section 92 Annual Retum
(b) Section 123 Declaration of Dividend
(c) Section 129 Financial Statement
(d) All of the above
 SHARE CAPITAL AND DEBENTURES 2001

117. The term Debenture' has been defined i n

(a) Section 2(10)
b) Section 2(20)
(C)Section 2(30) (d) Section 2(32)
118. The term 'debenfure' includes
(a) debenture stock
(b) bond
(c) any other instrument of a company evidencing a debt
(d) both (a) and (b) or )
119. Which one of the following is the characteristics of the debenture ?
(a) It is an instrument in writing and must contain an acknowledgernent of a debt

b) It is generally issued under the common seal of the company and

rate of interest
provides for payment of a fixed
(c) It may contain a
charge on the assets of the company
(d) All of the above
120. The issue of debenture with an option to convert such debentures into shares
shall b e
wholly or partly
(a) approved by a special resolhtion at a general meeting of the shareholders
b) approved by an ordinary resolution at a general meeting of the shareholders
C)approved by the Tribunal
(d) approved by the Central Govemment
121. Where debentures are issued by a company under section 71, the company shall create a reserve
out the profits available for payment of dividend and the amount credited to-
(a) Capital Redemption Reserve Account b) General Reserve Account
() Debenture Redemption Reserve Account (d) Securities Premium Account
122. Debenture Redemption Reserve Account shall not be utilised by the company except
(a) for the redemption of preference shares (b) for the redemption of debentures
)for the issue of sweat equity shares (d) for the issue of bonus shares
123. Which of the following statements is true?
(a) No company shal issue any debentures carying any voting rights
(b) No company shall issue a prospectus or make an offer or invitation to the public or to its members
exceeding 500 for subscription of its debentures, unless the company has appointed one or more
debenture trustees
A debenture trustee shall take steps to proteot the interests of the debenture holders and redress
their grievances in accordance with such rules as may be prescribed

(d) all of the above

124. Where at any time the debenture trustee comes to a conclusion that the assets of the company

are insufficient to discharge the principal as and when it becomes due, the debenfure trustee
may file a petition before
(a) the Tribunal b) the Central Govemment

(c) the shareholders of the company d) the Board of Directors

i!
8 8 8 E
 SHARE CAPITAL AND DEBENTURES203

14. State two applications of the Securilies Premium Account.

[5.111
15. What do you mean by shares issucd at a discount ?
[5.12]
16. How Capital Redemplion Rescrve is to be utilised ?
[5.14
17. What do you mean by Transfcr of Share ? [5.15]
18. What do you mean
by 'Transmission of Share ? [5.15]
19. State two points of dislinction between Transfer and
Transmission of Share. [5.15]
20. Can partly paid preference shares be redeemed ? [5.14]
21. Name the reserve to be created on
redemption of preference shares out of profit. [5.14]
22. What is meant by alteration of Share ? Capital [5.17]
23. What is Bonus Share ?
[5.18)
24. What do you mean by Forfeiture of Shares ?
[5.20]
25. What is meant by Reduction of Share
Capital ? [5.21]
26. Define Debenture. [5.24]
27. Distinguish between Share and Debenture. [5.24] [C.U.B.Com 2009]
C.U.B.Com. 2012]
C. Medium type Questions :
1. How many types of Share
Capital may be there and what are the types ? [5.1) [C.U.B.Com
2. Mention about different 2007]
types of Share Capital. [5.1]
3. Distinguish between Share and Stock. [5.2] IC.U.B.Com 2011]
4. [C.U.B.Com 2011]
Distinguish between Equity Share and Preference Share. [5.3]
5. What are the rules to be followed
regarding issue of Equity Share and Preference Share with different
voting rights. [5.6]
6. Discuss the rules regarding variation of shareholders' rights. [5.7]
7. Discuss the rules
regarding application premium received on issue of shares. [5.11]
of
8. Discuss the
prohibition on issue of shares at discount. [5.12]
9 What is Sweat Equity Share ? State the provisions relating to issue of Sweat
Equity Share. [5.13]
10. What rules are to be followed [C.U.B.Com 2012]
regarding redemption of Redeemable Preference Shares ? [5.14]
11. When can a
company refuse to register a transfer of shares ? [5.15]
12. Distinguish between Transfer and Transmission
of Share. [5.15]
13. Discuss the rules
regarding alteration of Share Capital. [5.17]
14. Explain the requisites of a valid call
shares. [5.9]on
15. When
duplicate
can a share certificate be issued ? [5.5]
16. Discuss the rules
regarding further issue of share capital. [5.18]
17. Discuss the legal
provisions relating to issue of bonus shares. [S.19
18. How can the Share
Capital
of a be reduced ?
company [5.20]
19. Define Debenture. How does it differ from Shares ?
[5.24] C.U.B.Com 2006, 2008, 2012
D.
Long Answer-type Questions
1. Explain the provisions relating to Certificate of Shares. [5.5]
2. Discuss the voting rights of Equity shareholder and Preference shareholders. [5.6]
204 CoMPANY LAw

3. Explain the provisions relating to variation of sharcholders' rights. [5.7]

4. (a) What is meant by call on shares ?
(b) Explain the requisites of a valid Call on Shares. [5.9]
5. (a) State the rules regarding application of premium received on issue of shares. [5.111
b) Explain the restrictions on issue of Shares at Discount. [5.12
6. Explain theprovisions relating to issue of Sweat Equity Shares. [5.131
7. (a) Distinguish between Equity Shares and Preference Shares.
(6) Mention about different types of Preference Shares.
[5.2] 5.2
8. What is Forfeiture of Shares? What are the
rules for Forfeiture C.U.B.Com 2013)
of Shares ?
[5.191
9 Explain the provisions relating to redemption of
Redeemable Preference Shares.
C.U.B.Com 2012]
10. Explain the [5.14|
procedure for effecting a transfer of Shares in a Limited
11. Explain the
provisions relating to alteration of Share Capital. Company. [5.15]
12. Discuss the nles [5.17]
regarding further issue of Share Capital.
13. Discuss the
legal provision relating to Reduction of
[5.18
14. Discuss the restrictions on capital. [5.21]
5.22]
purchase by company or giving of loans it for
by purchase of its shares.
15. (a) What do
you mean by Buy-back of Shares ?
(b) State the legal
provisions relating to Buy-back of Shares.
16. Define Debenture. What
the
[5.23]
are
characteristics of a Debenture ?
17. Discuss the different
of
[5.24]
types Debentures. [5.24]
18. Discuss the
legal provisions relating to Debentures. [5.24)