Maharashtra Board Class 12 SP Sample Paper Set 5 with Solutions

Maharashtra State Board Class 12th SP Sample Paper Set 5 with Solutions Answers Pdf Download.

Maharashtra Board Class 12 SP Model Paper Set 5 with Solutions

Time: 3 Hours
Max. Marks: 80

Notes:

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.

Question 1. (A)
Complete the sentences: (5) [20]

Question 1.
Planning of capital requirement is made by ____.
Answer:
Planning of capital requirement is made by finance manager.

Question 2.
Authority to create charge on company’s assets is with the ___.
Answer:
Authority to create charge on company’s assets is with the Board of Directors.

Question 3.
To collect deposits from public. Eligible public company must have a net worth of not less than ₹ ____.
Answer:
To collect deposits from public, Eligible public company must have a net worth of not less than ₹ 100 Crores.

Question 4.
Company cannot issue debentures with ________ rights.
Answer:
Company cannot issue debentures with voting rights.

Question 5.
The ____ must be cautious and careful while writing letters to the depositors.
Answer:
The secretary must be cautious and careful while writing letters to the depositors.

(B) Find the odd one: (5)

Question 1.
Debenture. Public deposit. Retained earnings
Answer:
Retained earning

Question 2.
Debenture Trustees. Court, NCLT
Answer:
Court

Question 3.
Deposit Trustee, Deposit Trust Deed, Special Resolution
Answer:
Special Resolution

Question 4.
Out of Capital. Out of free reserve. Out of money given by government
Answer:
Out of Capital

Question 5.
FPO, Private placement, Commercial paper
Answer:
Commercial paper

(C) Correct the underlined word and rewrite the following sentences: (5)

Question 1.
When there is recession in economy, sales will increase.
Answer:
When there is boom in economy, sales will increase.

Question 2.
Return on investment on debentures is dividend.
Answer:
Return on investment on debentures is interest.

Question 3.
Eligible Public company can accept deposits from relatives of directors.
Answer:
Private Company can accept deposits from relatives of directors.

Question 4.
ISIN is a code given to a company.
Answer:
ISIN is a code given to securities.

Question 5.
A bear expects the prices of shares to rise in future.
Answer:
A bull expects the prices of shares to rise in future.

(D) Arrange in proper order: (5)

Question 1.
i. Investment decision
ii. Feasibility of a project
iii. Financing decision
Answer:
i. Feasibility of a project
ii. Financing decision
iii. Investment decision

Question 2.
i. Appoint Deposit Trustee
ii. Hold General Meeting
iii. Create charge on assets
Answer:
i. Hold General meeting
ii. Appoint Deposit Trustee
iii. Create Charge on Assets

Question 3.
i. Dispatch of Share Certificate
ii. Allocation of shares
iii. Issue of Dividend Warrant
Answer:
i. Allocation of shares
ii. Dispatch of Share Certificate
iii. Issue of Dividend warrant

Question 4.
Conversion of physical certificates into demat form
i. Depository credits the demated securities to the beneficiary account.
ii. Investor (BO) submits DRF in triplicate and certificates to DP.
iii. Issuer confirms to depository about demating of securities.
Answer:
i. Investor (BO) submits DRF in triplicate and certificates to DP.
ii. Issuer confirms to the depository about demating of securities.
iii. Depository credit the demat securities to the beneficiary account.

Question 5.
i. Take Deposit Insurance
ii. Appoint Deposit Trustee
iii. Hold Board meeting to approve draft of advertisement
Answer:
i. Hold Board Meeting to approve draft of advertisement
ii. Appoint Deposit Trustee
iii. Take Deposit Insurance

Question 2.
Explain the following terms / concepts: (Any Four) [8]

Question 1.
Working capital
Answer:
Working capital is the capital which is used to carry out the day-to-day business activities. Working capital ensures smooth functioning of the business firm. The capital invested in building up inventories, in financing receivables and payables as well as covering day-to-day operating expenses is referred to as working capital.

Question 2.
Authorised capital
Answer:
Authorised capital is the maximum capital that a company can raise by issuing shares as authorised by Memorandum of Association. It is also called as Registered Capital as it is mentioned in the Capital Clause of Memorandum of Association and the company pays stamp duty on this amount at the time of incorporation. Authorised Capital is calculated considering the need of capital of a company at present and in future.

Question 3.
Eligible Public Company
Answer:
Eligible public company means a company having:

i. A Net worth of not less than ₹ 100 crores or,

ii. Turnover of not less than ₹ 500 crores and which has obtained prior approval of its shareholders through special resolution for accepting public deposits.

Eligible public companies can accept deposits from their members as well as the public.

Question 4.
Fungibility
Answer:
In financial terms, fungibility means the state of being interchangeable. The securities held in demat/electronic forms 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.

Question 5.
Financial market
Answer:
It is a market where financial assets i.e. financial instruments are exchanged or bought and sold. It represents the market which raises finance for the long-term via Capital Market and for the short-term via Money Market. Financial market helps in mobilisation of savings and converts it into investments. Thus, financial market acts as an intermediary between investors and borrowers.

Question 6.
Broker
Answer:
Broker 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. He earns income in the form of commission or brokerage.

Question 3.
Study the following cases / situations and express your opinion: (Any Two) [6]

Question 1.
XYZ Ltd. has started business with a capital of ₹ 1 Crore which is financed partly through issue of equity shares and partly by taking term loans.
i. What is the next step that the firm should take?
ii. In order to ensure maximum returns, what should be calculated first?
iii. What is the process of systematic investing of the funds is called as?
Answer:
i. After gaining the funds, the firm should take decision regarding the use of the funds in a systematic manner so that it will ensure maximum returns to the firm.

ii. In order to ensure that the funds will give the maximum returns, the firm has to first calculate the cost of capital.

iii. The process of systematic investment of funds by the company is called as capital budgeting or investment decisions.

Question 2.
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 ₹ 20. X pays the full money demanded by the company. Y, who is in a bad financial position, is unable to pay any money.
i. Can the company forfeit the shares of Y?
ii. Can the company forfeit the shares of X?
iii. Can X transfer his shares?
Answer:
i. The unpaid amount on partly paid up shares is a liability of the shareholder. If the shareholder fails to pay the calls, company can forfeit the shares. So, company can forfeit the shares of Y.

ii. No, the company can’t forfeit the shares of X as X has already paid the full money demanded by the company. Also, fully paid up shares cannot be forfeited.

iii. Every member has a right to transfer their shares. Mr. X 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. Under depository system, transfer of shares is automatically done on the basis of delivery against payment.

Question 3.
Mr. R holds 100 shares of Peculiar Co. Ltd. in demat mode:
i. He wants to transfer one share each to his wife, daughter and son. Can he do so?
ii. Does he need to submit DRF or DIS if he wants to transfer his shares?
iii. Can he nominate his wife in his demat account?
Answer:
i. Yes, he can transfer one share each to his wife, daughter and son.
ii. A DRF is a Demat Request Form. The shares held by Mr. R are already in demat form. So, he has to submit DIS i.e. Delivery Instruction Slip to transfer his shares to his family.
iii. Every depositor at any time has the right to nominate any person as nominee in the event of his/her death. So, Mr. R can nominate his wife.

Question 4.
Distinguish between the following: (Any Three) [12]

Question 1.
Equity shares and Preference shares
Answer:

Equity Shares	Preference Shares
i. Meaning
Shares that are not preference shares are called equity shares i.e. these shares do not have preferential right for payment of dividend and repayment of capital.	Preferences shares are shares that carry preferential right as to: a. Payment of dividend and b. Repayment of capital
ii. Rate of Dividend
Equity shareholders get dividend at a fluctuating rate depending upon the profits of the company.	Preference shareholders get dividend at a fixed rate.
iii. Voting Right
Equity shareholders enjoy normal/differential voting right. They participate in the management of their company.	Preference shareholders do not enjoy normal voting right. They can vote only on matters affecting their interest.
iv. Return of capital
Equity capital cannot be returned during the life time of the company (except in case of buy back).	A company issues redeemable preference shares which can be repaid during the life time of the company.
v. Nature of capital
Equity capital is known as ‘Risk capital.’	Preference capital is ‘Safe capital’ with stable return.
vi. Nature of Investor
The investors who are ready to take risk invest in equity shares.	The investors who are cautious about safety of their investment invest in preference shares.
vii. Face Value
The face value of equity shares is generally ₹ 1/- or ₹ 10/-. It is relatively low.	The face value of preference shares as relatively higher i.e. ₹ 100/- and so on.
viii. Rights and Bonus Issue
Equity shareholder is entitled to get bonus and rights issue.	Preference shareholders are not eligible for bonus and rights issue.
ix. Capital Appreciation
Market value of equity shares increases with the prosperity of a company. It leads to increase in the value of shares.	Market value of preference shares does not fluctuate so there is no possibility of capital appreciation.
x. Risk
Equity shares are subject to higher risk. It is due to fluctuating rate of dividend and no guarantee of refund of capital.	Preference shares are subject to less risk. It is due to fixed rate of dividend and preferential right as regards to payment of dividend and repayment of capital.
xi. Nature
Equity shares are classified into: a. Equity shares with normal voting right b. Equity shares with differential voting right	Preference shares are classified as: a. Cumulative preference shares b. Non-cumulative preference shares c. Participating preference shares d. Non-participating preference shares e. Convertible preference shares f. Non-convertible Preference shares g. Redeemable preference shares h. Irredeemable preference shares

Question 2.
Final dividend and Interim dividend
Answer:

Final Dividend	Interim Dividend
i. Meaning
Final dividend is the dividend which is declared arid paid after the close of the financial year.	Interim dividend is the dividend which is declared and paid between two AGMs.
ii. Declared by
Final dividend is decided and recommended by the Board of bisectors. It is declared by the shareholders in the AGM.	Interim dividend is decided and declared by the Board of bisectors in the Board Meeting.
iii. Authorisation
The declaration of final dividend does not need authorisation by Articles of Association.	Interim dividend can be declared only Articles of Association permits its declaration.
iv. When is Declared?
Final dividend is declared at the Annual General Meeting of the company.	Interim dividend is declared between two Annual General Meetings of the company.
v. Rate of Dividend
Rate of final dividend is always higher than interim dividend.	Rate of interim dividend is lower than final dividend.
vi. Source
Final dividend is declared from different sources like; current year’s profits, free reserves, capital profits, money provided by government for dividend, etc.	Interim dividend is declared out of profits of the current accounting year.
vii. Accounting aspect
Final dividend is declared only after the accounts of the year are prepared and finalised.	Interim dividend is declared before preparation of the final accounts of the company.

Question 3.
‘Primary market and Secondary market
Answer:

Primary Market	Secondary Market
i. Meaning
The issue of new securities by the company is done in the primary market.	The securities issued earlier are traded in the secondary market.
ii. Mode of Investment
In primary market, the securities are acquired directly from the company. It involves direct investment in securities.	In secondary market, the securities are acquired from other stakeholders. It involves indirect investment in securities.
iii. Parties
The parties dealing in primary market are company and investors.	The parties dealing in secondary market are only investors.
iv. Intermediary
The underwriters are the intermediaries in primary market.	The security brokers are the intermediaries in secondary market.
v. Value of security
The price of security in the primary market is fixed as it is decided by the company.	The price of security in the secondary market is fluctuating based on the demand and supply conditions in the market.

Question 4.
Jobber and Broker
Answer:

Jobber	Broker
i. Meaning
A jobber is a dealer who buys and sells securities in his own name.	A broker is an agent who buys and sells securities on behalf of his clients.
ii. Nature of Trading
A jobber carries out trading activities only with the broker.	A broker carries out trading activities with the jobber on behalf of investors.
iii. Restrictions On Dealings
A jobber cannot directly buy or sell securities in the stock exchange. He cannot directly deal with the investors.	A broker acts as a link between the jobber and investors. He buys and sells securities on behalf of investors.
iv. Agent
A jobber is a special mercantile agent.	A broker is a general mercantile agent.
v. Form of Consideration
A jobber gets consideration in the form of profit.	A broker gets consideration in the form of commission or brokerage.

Question 5.
Answer in brief: (Any Two) [8]

Question 1.
What is share and state its features?
Answer:
A share is a unit by which the share capital is divided. The total capital of a company is divided into small parts and each part is called a share. The value of each part or unit is known as face value. Share facilitates the public to subscribe to the capital in smaller amount. The features of shares are as follows:

i. Income
A shareholder is entitled to get a share in the net profit of the company. He earns income in the form of dividend.

ii. Meaning
A share is a smallest unit in the total share capital of a company.

iii. Property of Shareholder
A share is a movable property of a shareholder.

iv. 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.

v. Ownership
The owner of a share is called as shareholder. It shows the ownership of a shareholder in the company.

vi. Value of A Share
Each share has a value expressed in terms of money. There may be:

a. Face Value: It is written on the share certificate and mentioned in the Memorandum of Association.
b. Issue Price: It is the price at which company sells its shares.
c. Market Value: It is determined by demand and supply forces in the share market.

vii. Evidence of Title
A share certificate is issued by a company under its 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 dematerialised share.

viii. Distinctive Number
Unless dematerialised, each share has distinct number for identification. It is mentioned on the share certificate.

ix. Kinds of Shares
A company can issue two kinds of shares, viz. equity shares and preference shares. A company can issue different types of shares depending upon the right to control, income and risk.

x. Transferability
The shares of a public limited company are freely transferable in the manner provided in the Articles of Association.

Question 2.
Explain Employee Stock Option Scheme.
Answer:
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 also benefits the company since it can retain good employees.

Following are the provisions related to ESOS:

1. A company may offer the shares directly to the employees or through an Employee Welfare Trust.
2. The shares are offered at a price lesser than their market price.
3. There is a minimum vesting period of one year. Vesting period is the period during which the employee uses his option to apply for shares that have been granted to him.
4. Usually, a company will specify the lock-in period i.e. period during which employee cannot sell his shares. Lock-in period is minimum one year.
5. The shares issued under this scheme do not enjoy any dividend or voting rights till the employee buys the shares.
6. A company has to get the approval of shareholders through Special Resolution to issue ESOS.
7. Employee cannot transfer his option to any other person nor can he pledge or mortgage the shares issued under ESOS.
8. A company has to set up a compensation committee to administer ESOS. It also has to fulfil the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.

Question 3.
What is depository system? State its importance.
Answer:
The securities can be held in two modes, viz. physical mode and electronic or dematerialised mode. Under depository system, securities are held in electronic form.The transfer and settlement of securities are done electronically. The depository system maintains account of the shareholder, enables transfer, collects dividend and bonus shares etc. on behalf of the shareholder. This system is also called as scripless trading system.

The world’s first depository was set up in Germany in 1947. In India, the depository system was introduced by passing the Depositories Act in 1996. Under this Act, a competitive multi-depository system consisting of two depositories, viz. National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) was set up.

In the depository system, the depository is the custodian of the securities in electronic form and the Depository Participant (DP) acts as a link between the depository and the investor.

The importance of depository system can be explained with the following points:

1. It plays a very important role in the successful functioning of the capital market.
2. It aims at eliminating huge volume of paperwork involved in paper or scrip-based system.
3. It offers scope for paperless trading by using state-of-art (modern) technology.
4. It leads to elimination of storage and handling of certificates.
5. It reduces cost and efforts involved in storage and handling of physical certificates.

Question 6.
Justify the following statements: (Any Two) [8]

Question 1.
Fixed capital stays in the business almost permanently.
Answer:

1. Fixed capital is the capital which is used to purchase fixed assets of the business.
2. These fixed assets are used for a longer period of time and are not meant for resale.
3. In other words, fixed capital refers to the capital invested for acquiring fixed assets.
4. Examples of fixed capital are capital used for purchasing land and building, furniture, plant and machinery etc.
5. Hence, fixed capital stays in the business almost permanently.

Question 2.
Retained earnings is simple and cheapest method of raising finance.
Answer:

1. The process of accumulating corporate profits and their utilisation in business is called retained earnings.
2. Since business organisations are subject to variation in earnings, it is advisable to keep aside a part of earning during a period of high profit.
3. In simple words, a part of net profit, which is not distributed to shareholders as dividend is retained by company. This accumulated profit is reinvested in the business.
4. It is an important source of raising long term capital used by established companies. It is an internal source of finance.
5. The Management can convert retained earnings into permanent share capital by issuing bonus shares.
6. Hence, retained earnings is simple and cheapest method of raising finance.

Question 3.
To issue bonus shares, a company has to fulfil certain provisions.
Answer:
Bonus shares are fully paid shares issued free of cost to the existing equity shareholders in proportion to their shareholdings. Following are the provisions related to Bonus Issue:

1. A company can issue Bonus Shares only out of:
   • Free reserves or
   • Securities Premium Account or
   • Capital Redemption Reserve Account
2. A company cannot issue bonus shares out of reserves created by Revaluation of Assets.
3. It also cannot issue Bonus Shares instead of paying dividend.
4. Once the announcement for Bonus Shares is made by the Board of Directors, it cannot be withdrawn.
5. Bonus shares are fully paid up shares.
6. Thus, to issue bonus shares, a company has to fulfil certain provisions.

Question 4.
There is a limit or restriction on the amount that a company can collect as deposits.
Answer:

1. A Private Company can accept deposits from its members or Directors or Relatives of Directors not more than 100% of its aggregate of paid-up share capital and free reserves.
2. Public Company (other than Eligible Company) cannot accept fresh deposit from members if the amount of such deposits together with the previous deposits exceeds 35% of the aggregate paid-up share capital and free reserves of the company.
3. Government Company can accept deposits from public not exceeding 35% of the paid-up share capital and free reserves of the company.
4. Eligible public company cannot accept fresh deposits from its members if the amount of such deposits together with the previous deposits exceeds 10% of aggregate of paid-up share capital and free Reserves and 25% of aggregate of paid-up share capital and free Reserves in case of deposits from public.
5. Hence, there is a limit or restriction on the amount that a company can collect as deposits.

Question 7.
Attempt the following: (Any Two) [10]

Question 1.
Write a letter to the member for the payment of dividend through Dividend Warrant.
Answer:

ZOOM MOTORS LTD.
Registered office: Plot No. 20, Commercial Towers, M. G. Road,
Mumbai – 400001
CIN: L10020 MH 2000 PLC123456

Phone: 022-66665555
Fax: 022-22331111
Ref. No.: D/1010/20-21

Website: www.zoommotors.com
Email: [email protected]
Date: 15^th May, 2020

Mr. Sameer Joshi
201, Comfort Apartments,
L. B. S. Road,
Mumbai – 400002

Sub: Payment of Dividend on Equity Shares (Equity Shares of ₹ 10 each at par)

Dear Sir,

I am instructed by the Board of Directors to convey to you that in the 25^th Annual General Meeting held on 5^th May, 2020, Final dividend @ ₹ 2.5/- per equity share of ₹ 10/- each has been approved by the members for the year ending 31^st March, 2020.

The company has complied with all the statutory provisions (Sec. 123 of the Companies Act, 2013) relating to declaration and payment of dividend.

The details of Dividend Payable to you are as follows:

The ‘Dividend Warrant’ is attached herewith. Please detach the ’Dividend Warrant’ along the perforated line.

Thanking you,

Yours faithfully,
For Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary
End: Dividend Warrant

Question 2.
Write a letter to the debenture holder regarding payment of interest through Interest Warrant
Answer:

ZOOM MOTORS LTD.
Registered office: Plot No. 20, Commercial Towers, M. G. Road,
Mumbai – 400001
CIN: L10020 MH 2000 PLC123456

Phone: 022-66665555
Fax: 022-22331111
Ref. No.: IW/1010/20-21

Website: www.zoommotors.com
Email: [email protected]
Date: 20^th May, 2020

Mr. Sameer Joshi
201, Comfort Apartments,
L.B.S. Road,
Mumbai – 400002

Sub: Payment of Interest on Debentures

Dear Sir,

I am directed to inform you that, the Board of Directors has passed a resolution in the Board Meeting held on 18^th May, 2020 regarding payment of interest on your 100, 10% Non-convertible debentures of ₹ 100/- each.
The details of interest payable to you are as follows:

The Interest Warrant is enclosed herewith. Please detach the Interest Warrant along the perforated line.

Thanking you,

Yours faithfully,
For Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary
Encl: Interest Warrant

Question 3.
Draft a letter of thanks to the depositor of a company.
Answer:

ZOOM MOTORS LTD.
Registered office: Plot No. 20, Commercial Towers, M. G. Road,
Mumbai – 400001
CIN: L10020 MH 2000 PLC123456

Phone: 022-66665555
Fax: 022-22331111
Ref. No.: D/1010/20-21

Website: www.zoommotors.com
Email: [email protected]
Date: 20^th May, 2020

Mr. Sameer Joshi
201, Comfort Apartments,
L. B. S. Road,
Mumbai – 400002

Sub: Thanking Depositor for Fixed Deposit

Dear Sir,
We have received your application dated 15^th May, 2020 for investment of ₹ 1,00,000 in the fixed deposit of our company, as per the 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 deposit accepted are given in the following schedule:

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 Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary
Encl: Fixed Deposit Receipt No. 123

Question 8.
Answer the following: (Any One) [8]

Question 1.
Briefly explain the provisions of Companies Act, 2013 for issue of debentures.
Answer:
1. Debentures are issued by the company to raise funds for long-term as they can be repaid after a long period. It is a borrowed capital of the company and the debenture holders are the creditors of the company. If a company issues debentures, it has to fulfil the following provisions as per the Companies Act, 2013:

i. No Voting Rights
A company cannot issue debentures with voting rights. Debenture holders are creditors of the company. Hence, they do not have any voting rights except in matters affecting them.

ii. Types of Debentures
A company can issue:

a. Secured or unsecured debentures
b. 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.

iii. Payment of Interest and Redemption
A company shall redeem the debentures and pay interest as per the terms and conditions of their issue.

iv. Debenture Certificate
A company has to issue Debenture Certificate to the debenture holders within 6 months of allotment of debentures.

v. Create Debenture Redemption Reserve

a. A company has to create a Debenture Redemption Reserve Account out of profits of the company available for payment of debentures. This money can be used only for redemption of debentures.
b. As per the Companies (Share Capital and Debentures) Amendment Rules, 2019, MCA has removed Debenture Redemption Reserve requirement for listed companies, NBFCs and Housing Finance Companies.

vi. Appointment of Debenture Trustees

a. If a company issues prospectus or invites more than 500 people (either public or its members) it has to appoint one or more Debenture Trustees.
b. Debenture trustees protect the interest of the debenture holders.
c. A company has to appoint trustees by entering into a contract with them called as Debenture Trust Deed.

vii. Debenture Trustees Can Approach NCLT

a. Debenture Trustees have to redress the grievances of debenture holders.
b. If a company defaults in repaying the principal amount on maturity or defaults in paying interest, the Debenture Trustees can approach the National Company Law Tribunal (NCLT) for redressal.
c. NCLT can direct a defaulting company to repay the principal amount or interest.

viii. Impose Restrictions

a. 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.
b. NCLT can order a company to restrict incurring further liabilities so as to protect the interest of the debenture holders.

ix. Punishment For Contravention of Provisions of the Companies Act
If a company fails to comply with any provisions of the Companies Act, 2013, then the company and its officers shall be liable to pay fine or imprisonment or both as prescribed in the Act.

Question 2.
What are the statutory provisions governing declaration of dividend and payment of
dividend?
Answer:
Dividend is a part of the profits of the company that is distributed amongst its shareholders. A company has to keep in mind various legal provisions with respect to dividend.

Legal Provisions For Declaration of Dividend
The legal provisions regarding the declaration of dividend are as follows:

i. Board Meeting
Dividend can be declared only on recommendation of the 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

ii. Shareholders’ Approval

a. Dividend is approved by shareholders by passing an Ordinary Resolution at the Annual General Meeting.
b. The 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 Annual General Meeting, it cannot be revoked. A company is not permitted to declare it second time in that year.

iii. Separate Bank Account

a. A company must deposit the dividend amount in a separate bank account opened in a scheduled bank called as ‘Dividend Account’ within 5 days of its declaration.
b. When a company’s shares are listed on the stock exchanges, some additional requirements with respect to listings agreements must be followed.

iv. 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 a company has defaulted on:

1. Redemption of debentures or payment of interest
2. Redemption of preference shares
3. Payment of interest to financial institution

Legal Provisions For Payment of Dividend

The legal provisions regarding the payment of dividend are as follows:

i. Mode of Payment of Dividend
Dividend must be paid in cash and not in kind. It may be paid by cheque or dividend warrant or by any electronic mode to the shareholder.

ii. 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.

iii. Time Limit
There is a time limit within which dividend is to be paid. A company must pay dividend within 30 days from the date of its declaration.

iv. Dividend Entitlement
Dividend is payable only to the registered shareholders of the company. Preference shareholders are entitled to receive 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 payment to the preference shareholders and payment of arrears of dividend on cumulative preference shares.

v. Payment Made To
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.

vi. Default
If a company defaults in paying dividend in the given time, it results in:

a. Punishment to every Director of the company
b. A company will be liable to pay simple interest at the rate of 12% p.a. during the period when the default continues.

If a company fails to comply with any of these requirements, the company and directors shall be liable to pay fine.

Maharashtra Board Class 12 SP Previous Year Question Papers