Multiple Choice Questions

Unit 3- Share Capital and Debentures

Q1) Corrupt Limited has received a request from Mr. Suresh for transfer of 100 partly paid equity shares, to Mr. Ramesh. However, Mr. Ramesh expired in the meantime, but no intimation of the same has been received by the company. In the given circumstances, advise as per the provisions of the Companies Act, 2013:                                                                                                  

(a) Corrupt Limited will not register the transfer the shares in the name of Mr. Ramesh, without verification from Mr. Suresh

(b) Corrupt Limited can register the shares in the name of Mr. Ramesh as it is not aware of the untoward incident.

(c) Corrupt Limited will not register the transfer the shares in the name of Mr. Ramesh, without verification from Mr. Ramesh

(d) Corrupt Limited will give the shares back to Mr. Suresh

Q2) Raman, the original allottee of 2000 equity shares in ABC Limited has transferred the same to Ruchi. The instrument of transfer dated 21st August, 2020, duly stamped and signed by Raman was handed over to Ruchi. Advise Ruchi regarding the latest date by which the instrument of transfer along with share certificates must be delivered to the company, to register the transfer in its register of members.

(a) 21st August, 2020.

(b) 20th September, 2020

(c) 20th October, 2020.

(d) 19th November, 2020

Q3) Goals Limited, a listed company has authorised share capital of ₹ 25,00,000 (issued, subscribed and paid up capital of ₹ 20,00,000). The company has planned to buy back shares worth ₹ 10,00,000. What is the maximum amount of equity shares that the company is allowed to buy back based on the total amount of equity shares?

(a) ₹ 2,00,000

(b) ₹ 5,00,000

(c) ₹ 6,25,000

(d) ₹ 8,00,000

Q4) Shares issued by a company to its directors or employees at a discount or for a consideration other than cash for their providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called are known as:

(a) Equity Shares

(b) Preference Shares

(c) Sweat Equity Shares

(d) Redeemable preference shares

Q5)  The Articles of Association of a private limited company state that the company may issue preference shares which will have preference with respect to payment of dividend only but no  preference as to the repayment of capital, in the case of winding up. Is it possible for the company to issue such preference shares?

(a) No; as per section 43 preference shares should have both preferences.

(b) No; this will become an equity share as per section 43.

(c) Yes; because as per section 43 preference shares should have any one preference.

(d) Yes; because Articles of Association of the company allow issue of such preference shares and the issuing company is a private limited company.

Q6) If a company has Authorised Share Capital of ₹6,00,000, Paid-up Share Capital of ₹ 5,00,000 and a loan of ₹ 2,00,000 obtained from the State Government. The State Government has directed the company to convert its loan into equity shares, then such order shall have the effect of increasing:

(a) The subscribed share capital of the company

(b) The paid-up share capital of the company

(c) The Authorised Share Capital of the company

(d) All of the above

Q7)  A company bought back 10% of its equity shares in August 2020. Due to certain miscalculations during the first buy-back, it again bought back  another 10% equity shares in September 2020. Is second buy-back valid?

(a) It can do so subject to the fulfilment of other conditions because  maximum buy-back in a financial year is up to 25%

(b) It cannot do so because there must be a time gap of 12 months between two buy-backs

(c) It can buy back shares within one year but the company should pass an ordinary resolution at a meeting of its board

(d) It can buy back shares within one year but the company will have to pass a special resolution

Q8) Swagat Hospitality Limited defaulted in the repayment of last two instalments of term loan availed from National Commercial Bank. On 30th September, 2019, they cleared all the dues by repaying it. When can it issue equity shares with differential voting rights?

(a) Upon expiry of five years from the date on which the default was made good

(b) Upon expiry of three years from the end of the financial Year in which the default was made good

(c) Upon expiry of five years from the end of the financial Year in  which the default was made good

(d) Upon expiry of seven years from the end of the financial Year in which the default was made good

Q9) Shreem Lakshmi Jewellery Store Private Limited was incorporated on 27th August, 2020 with 30 persons as subscribers to the Memorandum of Association and with an Authorised share capital of ₹1 crore divided into equal number of shares off ₹1 each. Each subscriber subscribed for ₹1.00 lac shares. Advise the company about by what date it needs to deliver the share certificates to the subscribers.

(a) 17th September, 2020.

(b) 30th September, 2020.

(c) 27th October, 2020.

(d) 27th November, 2020.

Q10) Keshika, the original allottee and owner of 1000 equity shares of ₹ 50 each in Modern Biscuits Private Limited, wanted to transfer these shares to her younger sister Vanshika by way of gift. She completed the  transfer deed in all respects and delivered the same to the company along with the share certificates on 17th July, 2020. However, the company did not register the transfer even after the expiry of more than one month nor did it send any notice of refusal. The lone reminder to the company remained unanswered. An appeal is to be filed against the company with the National Company Law Tribunal (NCLT) against this failure to register transfer of the said shares. Who has the right to file the appeal in this regard?

(a) Keshika, who continues to remain owner and transferor of the said equity shares till they are registered in the name of Vanshika, has the right to file an appeal with NCLT against the company.

(b) Vanshika, as transferee and potential owner of equity shares, has the right to file an appeal with NCLT against the company.

(c) Both Keshika and Vanshika have to file a joint appeal with NCLT against the company, for neither Keshika nor Vanshika are authorised to file the appeal individually.

(d) As per its discretion, NCLT may allow either Keshika or Vanshika to file an appeal against the company.

Q11) Vanita Watches Limited has proposed to issue sweat equity shares to five of its employees for the ‘value additions’ made by them in term of economic benefits which proved beneficial to the company. The period for which the employees who have been allotted the said sweat equity shares cannot transfer them is:

(a) One year from the date of allotment

(b) Three years from the date of allotment

(c) Five years from the date of allotment

(d) Six months from the date of allotment

Q12) While making an application to the Tribunal for seeking its confirmation in respect of  extinguishing the liability of ₹3 per equity share, Medhavi Publishers Limited has to file a certificate along with the application, that the accounting treatment proposed by it for such reduction of share capital is in conformity with the accounting standards specified in the prescribed Section. Advise the company as to who can issue such certificate?

(a) Any of the directors of the company as authorised by the Board may issue such certificate

(b) A practicing company secretary is authorised to issue such certificate

(c) The auditor of the company is authorised to issue such certificate

(d) The legal advisor of the company is authorised to issue such Certificate

Q13) Super Brain Coaching Limited was engaged in offline coaching of students for various competitive examinations. It was one of the pioneer in its field. It suffered losses due to various social and government restrictions imposed on study centers. On account of this, it defaulted in the repayment of term loan for the first two quarters of the financial year 2023-24. However, Super Brain Coaching Limited adapted itself to the changing circumstances and shifted to online mode of coaching and revived its financial conditions. On 31st December 2023, it cleared all the dues and regularized the term loan. Super Brain Coaching Limited wants to issue equity shares with differential rights. When can the issue be made?

(A) On or after January 1^st 2029

(B) On or after April 1^st 2029

(C) On or after April 1^st 2027

(D) On or after January 1^st 2027

Q14) Prithvi Cements Limited is desirous of issuing debentures carrying voting rights. Which of the following options is best suited in such a situation:

(a) Prithvi Cements Limited can issue debentures carrying voting rights if an ordinary resolution is passed permitting such issue.

(b) Prithvi Cements Limited can issue debentures carrying voting rights if a special resolution is passed permitting such issue.

(c) Prithvi Cements Limited can issue debentures carrying voting rights if it mortgages land and buildings worth two times the amount of such debentures.

(d) Prithvi Cements Limited cannot issue debentures carrying voting rights.