Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 3 Issue of Shares Important Questions and Answers.
Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 3 Issue of Shares
1A. Select the correct answer from the options given below and rewrite the statements.
Question 1.
____________ of company must have provision regarding issue of bonus shares.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(b) Articles of Association
Question 2.
If a share of ₹ 100 is issued at ₹ 100, it is said to be issued at ____________
(a) Par
(b) Premium
(c) Discount
Answer:
(a) Par
Question 3.
If a share ₹ 100 is issued at ₹ 90, it is said to be issued at ____________
(a) Par
(b) Discount
(c) Premium
Answer:
(b) discount
Question 4.
____________ means placing the shares privately without inviting the public for subscription.
(a) Private placement
(b) Public placement
(c) Transfer
Answer:
(a) Private placement
Question 5.
A share certificate must be signed by at least ____________ directors.
(a) two
(b) three
(c) four
Answer:
(a) two
Question 6.
Letter of regret is accompanied by ____________
(a) refund order
(b) Call Letter
(c) Dividend warrant
Answer:
(a) refund order
1B. Match the pairs.
Question 1.
| Group ‘A’ | Group ‘B’ |
| (1) Share certificate | (a) Capitalization 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) Right Issue | |
| (h) Registered document | |
| (i) Public company collecting capital privately | |
| (j) Fewer applications than expected |
Answer:
| Group ‘A’ | Group ‘B’ |
| (1) Share certificate | (h) Registered document |
| (2) Bonus shares | (a) Capitalization of profit |
| (3) Under subscription | (j) Fewer applications than expected |
| (4) Transfer of shares | (e) Sale or gift of shares to another person |
| (5) Private placement | (i) Public company collecting capital privately |
Question 2.
| Group ‘A’ | Group ‘B’ |
| (1) Right 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 |
Answer:
| Group ‘A’ | Group ‘B’ |
| (1) Right issue | (f) Shares allotted to existing shareholders |
| (2) IPO | (j) Primary market |
| (3) Share Warrant | (b) Negotiable instrument |
| (4) Bonus issue | (h) Shares issued at free of cost |
| (5) Regret Letter | (i) Refund order |
Question 3.
| Group ‘A’ | Group ‘B’ |
| (1) Employees 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 the operation of law | |
| (g) Less capital | |
| (h) Shares issued at face value | |
| (i) Employees participation in business | |
| (j) Refund of money |
Answer:
| Group ‘A’ | Group ‘B’ |
| (1) Employees Stock Option | (i) Employees participation in business |
| (2) Oversubscription | (e) More capital |
| (3) Allotment of shares | (a) Board of Directors |
| (4) Transmission of shares | (f) Transmission of ownership shares due to the operation of law |
| (5) Issue at par | (h) Shares issued at face value |
1C. Write a word or a term or a phrase that can substitute each of the following statements.
Question 1.
A letter that informs the applicant that shares are allotted to him.
Answer:
Letter of Allotment
Question 2.
A letter that informs the applicant that shares are not allotted to him.
Answer:
Letter of Regret
Question 3.
Passing ownership of shares from Shareholders to another person voluntarily.
Answer:
Transfer of shares
Question 4.
A document that is an invitation to the general public to subscribe for shares of the company.
Answer:
Prospectus
Question 5.
Money paid along with the application of shares.
Answer:
Application money
Question 6.
The authority has the right to make calls on shares.
Answer:
Board of Directors
Question 7.
Giving shares to share applicant or specific person with whom the company has entered into the contract.
Answer:
Allotment of shares
1D. Find the odd one.
Question 1.
IPO, FPO, ESES.
Answer:
ESES
Question 2.
ESOS, ESPS, Bonus Shares, Sweat Equity.
Answer:
Bonus Shares
1E. Correct the underlined word/s and rewrite the following sentences.
Question 1.
Rights shares are offered to existing employees of a company.
Answer:
Rights shares are offered to existing shareholders of a company.
Question 2.
Letter of Regret should be sent to applicants whom shares are allocated.
Answer:
Letter of Allotment should be sent to applicants whom shares are allocated.
Question 3.
Transfer of Shares is done by operation of law.
Answer:
Transmission of shares is done by operation of law.
2. Explain the following terms/concepts.
Question 1.
Fixed Price Method
Answer:
- In an initial public offering (IPO), if the shares are offered at a fixed price such issue is known as the Fixed Price issue.
- In this method, the company mentions the quantity and the price at which shares are offered.
Question 2.
SARS
Answer:
- It is a method for companies to offer their employees a bonus compensation if the company performs well financially.
- The company allows a specified number of ‘Stock Appreciation Righf Units that are linked to the value of the Company’s shares on the date of allotment.
3. Answer in brief.
Question 1.
What is Transfer of Shares?
Answer:
- Transfer of shares means the transfer of ownership of the shares from one person to another against consideration.
- Transfer of shares is effected by removing the name of the existing shareholders (transferor) from the register of members and inserting the name of the new member (transferee).
- Transfer of shares is a voluntary process of transferring shares by a member of a company.
- A member may transfer the shares for consideration or give them away as a gift.
- In the case of public companies, shares are freely transferable subject to the provisions of the Articles of Association.
- In the case of private companies, there are restrictions on the free transfer of shares.
- A member has to apply to the company for the transfer of shares by filling the ‘Instrument of Transfer’ and submit the share certificate along with the required transfer fees.
- A member who is transferring the shares is called a Transferor and to whom the shares are to be transferred is called Transferor.
4. Answer the following questions.
Question 1.
Explain briefly the different offering shares to Existing Employees.
Answer:
A company can raise funds by offering shares to its existing employees as follows:
- Employees Stock Option Scheme (ESOS)
- Employee Stock Purchase Scheme (ESPS)
- Stock Appreciation Rights Scheme (EARS)
- Sweat Equity Shares
(i) Employees Stock Option Scheme (ESOS):
An employee stock option plan is an employee benefits scheme under which the company encourages its employees to acquire ownership in the form of shares. 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 predetermined price. Generally, these shares are issued at discount. The shares are offered at a price lesser than their market price.
Following are the provisions related to ESOS:
- A company may offer the shares directly to the employees or through an Employee Welfare Trust.
- The shares are offered at a price lesser than their market price.
- There is a minimum vesting period of one year.
- The company specifies the lock-in period. It is a minimum of one year between the grant of option and vesting.
- Shares issued under this scheme enjoy dividends or voting rights only after buying by employees.
- The company has to get the approval of shareholders through a special resolution to issue ESOS.
- An employee can neither transfer his option to any other person nor pledge/mortgage the shares issued under ESOS.
- The company has to set up a compensation committee to administer ESOS
- The company has to fulfill the provision of SEBI (Share Based Employee Benefits) Regulations, 2014.
(ii) Employee Stock Purchase Scheme:
An employee stock purchase scheme is a company-run programme in which participating employees can purchase companies equity shares 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:
- A different number of shares can be offered to different categories of employees.
- Shares issued through ESPS – should be listed on a recognized stock exchange.
- If ESPS is not a part of a public issue then it will have a one-year lock-in period from the date of allotment.
- The company has to fulfill the provisions of SEBI.
- The company has to get the approval of the shareholders by passing a special resolution to offer ESPS.
(iii) Stock Appreciation Rights Scheme:
- It is a method for companies to offer their employees a bonus compensation if the company performs well financially.
- The company allows 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 future date, the employee is paid the appreciation value in cash or through Equity Shares.
- There is no lock-in period for SARS. To issue SARS company has to get the approval of shareholders by a special resolution.
(iv) 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 one of the modes of making share-based payments to employees. It is issued in recognition of their valuable contribution in the prosperity of the company.
Sweat Equity Shares rank “Pari Passu” (equal footing) with other equity shares. These shares have a lock-in period of three years. The company has to get the approval of shareholders by passing a special resolution to issue Sweat Equity Shares.