Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 7 Correspondence with Debentureholders Important Questions and Answers.
Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 7 Correspondence with Debentureholders
1A. Select the correct answer from the options given below and rewrite the statements.
Question 1.
Debenture holders receive ______________ as a proof of their investment in the company.
(a) Share Certificate
(b) Debenture Certificate
(c) Share Warrant
Answer:
(b) Debenture Certificate
Question 2.
______________ have no right to attend company’s meetings.
(a) Shareholders
(b) Directors
(c) Debenture holders
Answer:
(c) Debentureholders
Question 3.
______________ have priority in the repayment of the capital at the time of winding up of the company.
(a) Debenture holders
(b) Shareholders
(c) Secretary
Answer:
(a) Debenture holders
Question 4.
Debentures are secured through charge on the ______________ of the company.
(a) Liability
(b) Profits
(c) Assets
Answer:
(c) Assets
Question 5.
The fund created for the redemption of debentures is known as ______________
(a) DRRF
(b) DHFL
(c) IEPF
Answer:
(a) DRRF
Question 6.
Debentures are repaid on maturity by using debenture ______________ reserve.
(a) Redemption
(b) Depreciation
(c) General
Answer:
(a) Redemption
Question 7.
Debenture holder has the right to inspect ______________
(a) Partnership Deed
(b) Memorandum of Association
(c) Trust Deed
Answer:
(c) Trust Deed
Question 8.
From the date of request, trust deed should be provided by the company with in ______________
(a) 14 days
(b) 7 days
(c) 21 days
Answer:
(b) 7 days
Question 9.
Communication in writing means ______________
(a) Correspondence
(b) Motion
(c) Voting
Answer:
(a) Correspondence
Question 10.
Debentures are issued after passing resolution at ______________
(a) Board Meeting
(b) General Meeting
(c) Committee Meeting
Answer:
(a) Board Meeting
1B. Match the pairs.
Question 1.
| Group ‘A’ | Group ‘B’ |
| (1) Courtesy | (a) Wrong Publicity |
| (2) Prompt Response | (b) True and Real Facts |
| (3) Transparency | (c) Politeness |
| (4) Conciseness | (d) Up to 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 |
Answer:
| Group ‘A’ | Group ‘B’ |
| (1) Courtesy | (c) Politeness |
| (2) Prompt Response | (e) Reply without delay |
| (3) Transparency | (b) True and Real Facts |
| (4) Conciseness | (k) Brief and to the point |
| (5) Precise Information | (d) Up to date information |
| (6) Secretary | (h) Confidential Officer |
| (7) Goodwill | (m) Good image of the company |
1C. Write a word or a term or a phrase that can substitute each of the following statements.
Question 1.
Capital raised by the company by issuing debentures.
Answer:
Debenture Capital
Question 2.
Rate of interest on debentures.
Answer:
Fixed
Question 3.
Debentures are secured by a charge of the assets of the company.
Answer:
Secured Debentures
Question 4.
Debentures are redeemable after a certain period of time.
Answer:
Redeemable Debentures
Question 5.
The Debenture holder has a right to inspect and obtain copies of this deed.
Answer:
Trust Deed
Question 6.
Debenture holder who gets interested through interest coupons.
Answer:
Bearer Debenture holder
Question 7.
The Debentures are issued to the public by issuing this document.
Answer:
Prospectus
Question 8.
The type of Debentures which can be converted into equity shares.
Answer:
Convertible Debentures
1D. State whether the following statements are true or false.
Question 1.
Debenture holders are the creditors of the company.
Answer:
True
Question 2.
Debenture holders enjoy normal voting rights.
Answer:
False
Question 3.
Debentures can be issued to more than 500 people without appointing Debenture Trustee.
Answer:
False
Question 4.
Debenture Certificate is issued within 6 months from the date of allotment of debentures.
Answer:
True
Question 5.
Secretary is the confidential officer of the company.
Answer:
True
1E. Find the odd one.
Question 1.
Courtesy, Transparency, Enclosure
Answer:
Enclosure
Question 2.
Conciseness, Accuracy, Inside address
Answer:
Inside address
Question 3.
Convertible Debentures, Secured Debentures, Cumulative Preference Shares.
Answer:
Cumulative Preference Share
1F. Complete the sentences.
Question 1.
Convertible Debentures are converted into ______________ on the maturity.
Answer:
Equity shares
Question 2.
Redeemable Debentures are ______________ on the date of maturity.
Answer:
Repaid
Question 3.
Registered Debenture holders get interest through ______________
Answer:
Interest Warrant
Question 4.
Bearer Debenture holders get interest through ______________
Answer:
Interest Coupons
Question 5.
Secured Debentures are secured by ______________ on the assets of the company.
Answer:
Charge
Question 6.
Being the creditors, due ______________ should be given to the Debenture holders while corresponding.
Answer:
Respect
Question 7.
The secretary should follow the ______________ of the Companies Act, 2013 .
Answer:
Statutory Provisions
Question 8.
As a Confidential Officer of the company, the secretary should not disclose any important and ______________ information related to the company while corresponding.
Answer:
Secret
Question 9.
The information provided by the secretary must be factual and ______________
Answer:
True
1G. Select the correct option from the bracket.
Question 1.
| Group ‘A’ | Group ‘B’ |
| (a) Interest Warrant | (1) ………………….. |
| (b) ……………………….. | (2) Interest Coupons |
| (c) ………………………… | (3) Secured Debenture |
(Bearer Debentures, Registered Debentures, Charge on the assets)
Answer:
| Group ‘A’ | Group ‘B’ |
| (a) Interest Warrant | (1) Registered Debentures |
| (b) Bearer Debentures | (2) Interest Coupons |
| (c) Charge on the assets | (3) Secured Debenture |
1H. Answer in one sentence.
Question 1.
Who is appointed when the issue of debentures exceeds more than 500 people?
Answer:
Debenture trustees are appointed when the issue of debentures exceeds more than 500 people.
Question 2.
Debenture Certificate should be issued within how many months from the date of allotment of Debentures?
Answer:
Debenture Certificate should be issued within 6 months from the date of allotment of Debentures.
Question 3.
Which debentures are converted into equity shares?
Answer:
Convertible Debentures are converted into equity shares.
Question 4.
Who has to communicate the decisions of the management and other information to the Debenture holders?
Answer:
The secretary has to communicate the decisions of the management and other information to the debenture holders.
Question 5.
Which fund is created for Redemption of Debentures?
Answer:
A Debenture Redemption Reserve Fund is created for Redemption of Debentures.
1I. Correct the underlined word/s and rewrite the following sentences.
Question 1.
Debentures carry a fluctuating rate of interest as a return on investment in debentures.
Answer:
Debentures carry a fixed rate of interest as a return on investment in debentures.
Question 2.
Debenture Capital is the owned capital of a company.
Answer:
Debenture Capital is the borrowed capital of a company.
1J. Arrange in proper order.
Question 1.
Redemption of Debentures, Debenture Redemption Reserve Fund, Debenture Redemption Form.
Answer:
Debenture Redemption Reserve Fund, Debenture Redemption Form, Redemption of Debentures
2. Study the case/situation and express your opinion.
1. As a secretary of Velon Industries Limited.
Question (a).
Give any three circumstances where the company will have to correspond with the debenture holders.
Answer:
Secretary will correspond with the debenture holder under the following circumstances:
- Allotment Letter to debenture holders.
- Payment of Interest.
- Redemption of debentures.
Question (b).
What precautions should be taken while drafting the letters?
Answer:
As a secretary, one should be polite, transparency should be maintained and the image of the company should be kept in mind while drafting the letters.
Question (c).
Board Resolution is necessary for the payment of interest?
Answer:
Yes, Board Resolution is necessary for the payment of interest.
2. Disha Industries Ltd. Allots debentures to Mr. Vijay Mittal.
Question (A).
Which letter will be sent to Mr. Vijay Mittal?
Answer:
Letter of Allotment of Debentures will be sent to Mr. Vijay Mittal.
Question (b).
Why does Vijay Mittal preserve the Allotment Letter?
Answer:
Mr. Vijay Mittal preserves the allotment letter because he will receive a Debenture Certificate in exchange for the allotment letter.
Question (c).
What details does the letter contain?
Answer:
The letter contains the details of the issue of debentures i.e number of debentures applied, numbers of debentures allotted, distinctive numbers of debentures, amount received, types of debentures, rate of interest, maturity date, etc.
3. Rolta India Limited wants to pay interest to the debenture holders.
Question (a).
Which resolution is required for the payment of interest to debenture holders?
Answer:
Board Resolution is required for the payment of interest to the debenture holders.
Question (b).
Can the company pay interest in the next year as in the current year company has incurred a loss?
Answer:
No, the company has to pay the interest as it does not depend upon the profits of the company.
Question (c).
How can the company pay interest to the debenture holders?
Answer:
The company can pay interest to debenture holders by the way of interest warrant and electronic mode i.e. ECS and NEFT.
3. Answer in brief.
Question 1.
What is a debenture? Explain Debenture Capital.
Answer:
Debentures is an instrument in writing, acknowledging a debt under a common seal of a company.
- Debenture represents the borrowed capital of a company.
- The debenture is an acknowledgment of debt.
- The debenture holder is a creditor of the company.
- Compared to equity shares, debenture capital is considered safe and secured capital.
- Debentures are repaid on the expiry of a fixed period at the winding up of the company before equity shares are repaid.
- A debenture may be secured, unsecured, redeemable, convertible, non-convertible, etc
- Secured debentures have a charge on the assets of the company.
- Redeemable debentures are repaid on the expiry of a fixed period.
- Convertible debentures are converted into equity shares on the expiry of a fixed period.
- Non-convertible debentures cannot be converted into equity shares but are repaid on the expiry of the fixed period.
Question 2.
State any four precautions to be taken while drafting letters to the debenture holders.
Answer:
The following precautions are to be kept in mind by the secretary while corresponding with the debentures.
(i) Transparency:
- Transparency with debenture holders has to be maintained.
- It is necessary to disclose correct and accurate information of the company, favourable as well as the adverse credit rating of the company, etc. in correspondence.
(ii) Politeness (Courtesy):
- As debenture holders are the creditors of the company, proper respect should be given to them in correspondence.
- The use of words in the letter should be proper which depicts respect to the debenture holders.
- Rude and harsh words should be strictly avoided.
(iii) Conciseness:
- Letters to the debenture holders should be brief and to the point.
- Unnecessary information should be avoided.
(iv) Accuracy/Precise information:
- The secretary should provide precise and up-to-date information to debenture holders.
- The information must be true and correct.
Question 3.
When does a secretary enter into correspondence with debenture holders?
Answer:
- Debenture holders are creditors of the company.
- Therefore, they do not participate in the management of the company.
- They do not enjoy voting rights.
- Whatever decisions are taken by the management, are communicated to them by the secretary.
- A secretary has to enter into correspondence with the debenture holders under the following circumstances:
- Informing the applicant about allotment of debentures.
- Informing about payment of interest through
- Interest warrant
- Electronic payment of Interest
- Letter of conversion of debentures into equity shares.
- Letter for the redemption of debentures.
4. Justify the following statements.
Question 1.
Debenture holders are the creditors of the company.
Answer:
- Debenture represents borrowed capital of the company.
- It is an acknowledgment of debt issued by the company under its common seal.
- The person buying the debenture is known as the ‘Debenture holder’.
- Debenture holders are the creditors of the company.
- They provide loans to the company and hence, enjoy fixed-rate interest as a return on their investment.
- Debentures are secured and redeemable. They are repaid after a certain period of time, i.e. on the maturity date.
- Thus, it is rightly justified that, debenture holders are the creditors of the company.
Question 2.
The company secretary should follow legal provisions while corresponding with Debenture holders.
Answer:
- Debenture holders are the creditors of the company and hence, the secretary has to correspond with Debenture holders on different occasions.
- The secretary should follow the statutory provisions of the Companies Act, 2013 and other relevant laws while corresponding with Debenture holders.
- Secretary should be cautious and careful while corresponding with debenture holders on legal matters. He should be aware of legal consequences.
- Non-compliance with legal provisions can result in legal consequences, creating problems for the company.
- Thus, it is rightly justified that, the company secretary should follow legal provisions while corresponding with debenture holders.
Question 3.
Interest is a debt.
Answer:
- Debenture capital is the borrowed capital of the company.
- Debenture holders are the creditors of the company receiving the fixed rate of interest.
- The company pays the interest through interest warrant and electronic mode i.e. Electronic Clearing System (ECS) or National Electronic Fund Transfer (NEFT).
- Interest is to be paid compulsorily even if the company makes a loss. It does not depend upon the profits of the company.
- Thus, it is rightly justified that, interest is debt.
5. Attempt the following.
Question 1.
Explain the different types of letters written to the debenture holders.
Answer:
Secretary has to communicate with the management and the debenture holders for various reasons. This communication is done by drafting letters to the debenture holders. A secretary should be very cautious and careful while corresponding with debenture holders of the company. Following are the circumstances when the secretary corresponds with the debenture holders.
(i) Debenture Allotment Letter.
- An allotment Letter is sent to the debenture holders when the company allows debentures to the applicant.
- Allotment Letter is preserved by the debenture holder till he receives Debenture Certificate in exchange for this letter.
- Allotment Letter contains details of the issue of debentures, i.e. name of debenture holder, debentures issued, face value, types of debentures, rate of interest, etc.
(ii) Payment of Interest Letter.
- Interest is paid to the debenture holders through:
- Interest Warrant
- Electronically
- Payment of Interest Letter contains details such as a number of debentures, distinctive numbers, the gross amount of interest payable, TDS deducted, the net amount of interest payable, etc.
- Board Resolution is required for the payment of interest on debentures.
(iii) Conversion of Debentures Letter.
- Debentures are converted into equity shares.
- Conversion of Debenture Letter is issued only when the company receives Letter of Option.
- After conversion, a share certificate is issued.
- Approval of shareholders is necessary by passing a special resolution at Extra-Ordinary General Meeting.
- Only after receiving the shareholders’ approval, letter of conversion of debentures is sent to debenture holders.
(iv) Redemption of Debentures Letter.
- Debentures are redeemed after a specific period.
- Debenture Redemption Reserve Fund (DRRF) is created for the redemption of debentures.
- Debenture Redemption Form (DRF) is sent along with the letter.
- This letter informs that their debentures have become due for redemption.