Maharashtra Board Class 12 SP Sample Paper Set 3 with Solutions

Maharashtra State Board Class 12th SP Sample Paper Set 3 with Solutions Answers Pdf Download.

Maharashtra Board Class 12 SP Model Paper Set 3 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)
Answer in one sentence: (5) [20]

Question 1.
Define working capital.
Answer:
Working capital is the capital which is used to carry out the day-to-day business activities.

Question 2.
What do debenture holders receive as return on investment?
Answer:
The debenture holders receive interest as a return on investment.

Question 3.
What is Deposit Repayment Reserve Account?
Answer:
Every company which accepts deposits has to open an account in scheduled Bank which is known as Deposit Repayment Reserve Account. It can be used only for the repayment of the deposit.

Question 4.
What are convertible debentures?
Answer:
Convertible Debentures are the debentures which are converted into equity shares on the expiry of specified period and at a specified rate mentioned in the terms of issue.

Question 5.
What is renewal of deposit?
Answer:
A process whereby the deposit holder continues with the deposit for an additional time period after the completion of the initial time period of investment (deposit) is called as ‘Renewal of Deposit’.

(B) Give one word/phrase/term: (5)

Question 1.
A document of title of ownership of shares.
Answer:
Share Certificate

Question 2.
Period within which debenture certificate must be issued by a company.
Answer:
6 months from allotment

Question 3.
Agreement between company and Deposit Trustee.
Answer:
Deposit Trust Deed

Question 4.
A market which provides long-term funds.
Answer:
Capital Market

Question 5.
Book which contains details of deposits accepted or renewed.
Answer:
Register of Deposit

(C) Find the odd one: (5)

Question 1.
Land and Building, Plant and Machinery, Cash
Answer:
Cash

Question 2.
Debenture holders, Interest, Dividend
Answer:
Dividend

Question 3.
Private company, Non-eligible public company, Government company
Answer:
Government company

Question 4.
Elimination of storage of certificates, Theft of certificates, Tom certificates.
Answer:
Elimination of storage of certificates

Question 5.
BSE, NSE, LSE
Answer:
LSE

(D) State whether the following statements are true or false: (5)

Question 1.
Liberal credit policy creates a problem of bad debts.
Answer:
True

Question 2.
Calls not paid by shareholder are called as calls in arrears.
Answer:
True

Question 3.
Deposit Receipt is issued within 21 days of receipt of deposits.
Answer:
True

Question 4.
Dividend is the portion of the profits of the company which is allotted to the holders of the debentures of the company.
Answer:
False

Question 5.
Depository system is very similar to banking system.
Answer:
True

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

Question 1.
Investment decision
Answer:
Investment decisions involve taking decision regarding the use of the funds in systematic manner so that it will bring maximum return for its owners. The firm has to take into consideration the cost of capital and deploy the funds in such a way that returns are more than cost of capital.

Question 2.
Tenure of Deposit
Answer:
A company cannot accept or renew a deposit which is to be repaid within a period of six months or more than thirty-six months. In certain circumstances, a company may accept deposits repayable earlier than six months to meet its short-term needs. Such deposits must have tenure of minimum three months and the amount of such deposits cannot be more than 10% of aggregate of the paid-up share capital and free reserves of the company

Question 3.
ISIN
Answer:
ISIN is a code that uniquely identifies a specific securities issue. It is a standard numbering system which is accepted globally. In India, issuing ISINs to securities is assigned by SEBI to NSDL (for demated shares). For Government securities, allotment of ISIN is done by the RBI. ISIN consists of a 12 (Twelve) digit alpha-numeric code which is divided in three parts. The company has to apply for ISIN for its securities with documents like prospectus.

Question 4.
Rate of Dividend
Answer:
Dividend is that part of the profits of a company which is distributed amongst its shareholders. Equity shares are given dividend at fluctuating rate depending upon the profits of the company. Preference shareholders get dividend at fixed rate. Also, rate of interim dividend is lower than final dividend.

Question 5.
Primary market
Answer:
In primary market, companies sell their shares, debentures, etc. for the first time to raise fresh capital. It exclusively deals with the issue of new securities and hence, also called the new issues market. The main function of the primary market is to facilitate capital formation. Primary market is classified as equity market and debt market.

Question 6.
Contract Note
Answer:
It is a note given by the broker to his client. It is in a specific form. It validates the transaction. All the details of the transaction are mentioned in a contract note. Both the broker and the client will have one copy each immediately after the transaction within 24 hours.

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

Question 1.
Mr. R is planning to start a new business enterprise. He has certain queries’ regarding the financing of his business. Advise him regarding the following:
i. What is the first and foremost step that he should take?
ii. Which aspects he should take into account while deciding the volume of capital?
iii. When can he start his project?
Answer:
i. The first and foremost step that he should take is to decide on the amount of capital he will require to start and run the business.

ii. While deciding the volume of capital, he should take into consideration the fixed capital and the working capital requirements.

iii. He can start his project only after he is satisfied with the feasibility or commercial viability of his project.

Question 2.
Mrs. Z wishes to open a demat account in her name.
i. Can she open the account going to Mumbai office of NSDL?
ii. Is she required to pay for opening of account and its maintenance?
iii. Does she have to send the shares to respective company for demating?
Answer:
i. No, Mrs. Z cannot open a demat account by going to Mumbai office of NSDL. NSDL is a depository which is like a central bank. She has to open a demat account with a Depository Participant (DP).

ii. Yes, Mrs. Z has to pay for opening of account and its maintenance/ for availing services of DP.

iii. No, she doesn’t have to send the shares to respective company for demating. She has to send the physical share certificates and Demat Request Form (DRF) in triplicate to the DP.

Question 3.
LMN Co Limited decides to declare dividend for the financial year 2018-19 in which it has
earned profits less than their expectations.
i. Is Board right in recommending a dividend of ₹ 5/- per share out of free reserves?
ii. Can Board declare the dividend though it is not approved by AGM?
iii. Can the Board give dividend in the form of gifts?
Answer:
i. Yes, the Board can recommend dividend of ₹ 5/- per share out of free reserves. This is because companies are allowed to pay final dividend out of their free reserves.

ii. No, the Board cannot declare the dividend without shareholders’ approval at the AGM. Dividend as recommended by Board of Directors is approved and declared by a resolution passed at the Annual General Meeting by the shareholders.

iii. No, the Board cannot give dividend in the form of gifts. This is because dividend must be paid in cash and not in kind.

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

Question 1.
Share and Debenture
Answer:

Share	Debenture
i. Meaning
A share is a part of share capital of a company. Shares are known as ownership securities.	A debenture is a certificate of loan taken by a company. Debentures are known as creditorship securities.
ii. Status
A holder of shares is the owner of a company. Therefore, share capital is owned capital.	A holder of debentures is the creditor of a company. Therefore, debenture capital is loan capital or borrowed capital.
iii. Nature
Equity share capital is permanent capital. It is not repaid during the life time of the company.	It is temporary capital. Generally, it is repaid after a specific period.
iv. Voting Right
Shareholders being owners enjoy voting rights in general meeting. They participate in the management of the company.	Debenture holders being creditors do not have any voting right. They cannot participate in the management of the company.
v. Return on Investment
Return on shares is called dividend. Equity shareholders receive divided at a fluctuating rate whereas preference shareholders receive divided at a fixed rate.	Return on debentures is called interest. It is fixed at the time of issue. Interest is paid even when company has no profit.
vi. Security
Share capital is unsecured capital. No security is offered to the shareholder.	Debenture capital being loan capital is mostly secured by creating a charge on company’s property.
vii. Time of issue
Shares are issued in the initial stages of the company formation.	Debentures are issued at a later stage when the company has properties to offer as security.
viii. Suitability
Shares are suitable for long-term finance.	Debentures are suitable for medium – term finance.
ix. Types
Shares are classified into: i. Equity shares ii. Preference shares	Debentures are classified as: a. Secured debentures b. Unsecured debentures c. Registered debentures d. Bearer debentures e. Redeemable debentures f. Irredeemable debentures g. Convertible debentures h. Non-convertible debentures
x. Position on Liquidation
Shareholders being owners, rank last in the list of claimants on liquidation of a company.	Debenture holders being creditors, rank prior to shareholders for repayment on liquidation of a company.

Question 2.
Initial Public Offer and Further Public Offer
Answer:

Initial Public Offer (IPO)	Further Public Offer (FPO)
i. Meaning
IPO refers to an offer of securities by an unlisted public company to the public for the first time.	FPO refers to an offer of securities by a listed public company to the public to raise subsequent capital.
ii. Type of Issuer Company
It is issued by an unlisted public company.	It is issued by a listed public company.
iii. When Issued
It is usually issued by an existing company which wants to raise capital the public for the first time.	It is usually issued by a listed public company which wants to raise further capital from the public.
iv. Order of Issue
IPO precedes FPO. IPO is the first time sale of shares to the public.	FPO is always done after IPO. FPO is the second or subsequent sale of shares to the public.
v. Listing
A company has to get itself listed for the first time when it issues IPO.	A company making an FPO is already a listed company.
vi. Risk
It is very risky for the investor as he cannot pedict the company’s performance.	It is less risky for the investor as he has an idea of the company’s past performance and cari judge its future performance.

Question 3.
Bull and Bear
Answer:

Bull	Bear
i. Meaning
A bull is a speculator who expects the price of a share (securities) to rise.	A bear is a speculator who expects the price of a share (securities) to fall.
ii. Nature
A bull buys securities with the hope of selling them at higher prices to earn	A bear sells securities at prevailing prices to avoid losses as he expects further fall in prices.
iii. Effect on Prices of Securities
The actions of bulls increase the prices of securities as there is excess of purchase over sales.	The actions of bears reduce the prices of securities as there is excess of sales over purchase.
iv. Active During
The bulls are active during a rally, i.e. upward movement of Sensex or Nifty.	The bears are active during a crash, i.e. downward movement of Sensex or Nifty.

Question 4.
Money market and Capital market
Answer:

Money Market	Capital Market
i. Meaning
Money market is a component of the financial market where short-term borrowing and lending takes place.	Capital market is a component of the financial market where long-term borrowing and lending takes place.
ii. Time Period
In money market, the instruments traded have maturity period of one year or less than one year.	In capital market, the instruments traded have maturity period of more than one year.
iii. Instruments
Certificate of Deposits (CDs), Commercial Papers (CPs), Treasury bills (T-bills), repurchase agreements, etc. are the instruments traded in money market.	Shares, debentures, bonds, securities of the government are the instruments traded in capital market.
iv. Purpose of Borrowing
In money market, funds are borrowed for short-term to meet working capital requirements or for small investments.	In capital market, funds are borrowed for long-term to establish new business, expand or diversify it or to purchase fixed assets.
v. Participants
Participants in the money market include central bank, commercial banks, acceptance houses, non-bank financial institutions, bill brokers, etc.	Participants in the capital market include stock exchanges, commercial banks, non bank institutions, financial intermediaries, etc.
vi. Risk
Risk factor is very less in money market because maturity period of the instruments is less than one year.	Risk is more in capital market as compared to the money market as instruments have long maturity period.
vii. Return on Investment
Return on investment is less as money market instruments are highly liquid and safe.	Return on investment is comparatively high as capital market instruments are riskier.
viii. Role in Economy
Money market increases liquidity of funds in the economy.	Capital market helps in mobilisation of savings in the economy and raising long-term funds.

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

Question 1.
What is debenture trust deed?
Answer:

1. A company enters into a contract with one or more Debenture Trustees.
2. Debenture Trust Deed is a legal instrument conveying the assets of a company to the Trustees.
3. The terms and conditions agreed upon by the company and the Trustees are written in the Debenture Trust Deed.
4. The deed also defines the rights of debenture holders as well as the duties and powers of Debenture Trustees.
5. A company has to execute the deed within 3 months of the closure of issue.
6. Members as well as debenture holders can inspect the deed and also get a copy of it by paying a certain fee.

Question 2.
Explain the constituents of depository system.
Answer:
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.

All operations under the depository system are performed by depository with the help of its constituents as follows:

i. Depository

a. The depository is an organisation like the Central Bank where securities are held in electronic form at the investor’s request.
b. It also provides different services related to different transactions in such securities.
c. It is responsible for safe-keeping of the investor’s securities.
d. The investor does not have direct access to the depository.
e. It works as a link between the company and investors.

ii. Depository Participant (DP)

a. Depository Participant (DP) is the agent of depository.
b. DP is registered under the SEBI Act. It enjoys rights and obligations as specified under SEBI (Depositories and Participants) Regulations of 1996.
c. It is an intermediary appointed by depository.
d. DP acts as a link between depository and the investor.
e. It directly deals with customers. It sends statement of accounts periodically.
f. It functions like a securities bank. It maintains account of securities of each investor.
g. It facilitates dematerialisation.
h. It credits securities in the event of rights issue, bonus issue, etc.
i. It handles instant transfer of pay-outs like dividend, interest, etc.
j. It settles trade electronically.
k. Financial institutions, banks, approved foreign banks, custodians (responsible for overseeing operations of assets/ fund), stock brokers, Clearing Corporation, Non-Banking Financial Company (NBFC), Registrar to an Issue and Share Transfer Agents can work as DPs.
l. The DP has a unique number for identification.

iii. Beneficial Owner (BO)

a. The BO is the investor of securities who has availed the services of DP.
b. BO is entitled to all rights and benefits as well as subject to all liabilities with respect to securities held by depository. E.g. BO is entitled to bonus, dividends etc. on the shares held by the depository on his behalf. Similarly, he is also liable for any unpaid amount on shares held by the depository on his behalf.
c. BO can also be called as client of depository and DP.
d. BO is required to open a demat account with the DP for electronic holding of securities.
e. BO has to pay charges to the DP for availing the services of DP.
f. BO is given a unique account number in which securities are held.

iv. Issuer Company
a. It is the company which has issued the securities which are dematerialised.
b. It must register with the depository.

Question 3.
State the legal provisions on sources 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 provisions with respect to dividend. The legal provisions related to sources of dividend are as follows:

i. Payment of Dividend Out of Profits
A company may declare and pay dividend for any financial year out of the following:

a. Current profits i.e. profits of the company of that year; arrived at after providing for depreciation and transfer to Reserves.
b. Out of profits of the company of any previous financial year, after providing for depreciation.
c. Money provided by the Central or State Government to pay dividend.

ii. Payment of Dividend Out of Capital Profits
Capital profits arise when a company sells a part of its fixed assets at price higher than original cost of such assets or premium earned on the issue of shares.

Dividend can be paid out of capital profits on fulfilling following conditions:
a. Capital profits are realised in cash.
b. Articles of Association of the company permit such a distribution.
c. It remains as profits after revaluation of all assets and liabilities.

iii. Dividend Cannot Be Paid Out of Capital
It is not permitted to pay the dividend out of capital of the company.

iv. Dividend Can Be Paid Out of Free Reserves
It is allowed to pay the dividend out of free reserves of the company. Free reserves are the reserves available for distribution of profits as per latest audited balance sheet of the company.

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

Question 1.
Capital structure is composed of owned hinds and borrowed funds.
Answer:

1. Capital structure means to decide on the ratio of different types of capital of a firm.
2. A company can source the funds from owned funds like share capital, reserves and surplus.
3. It can also raise funds through borrowed capital like debentures, bank loans and long-term loans provided by financial institutions
4. Capital structure is a mix of the various sources of funds in the desired proportion.
5. Thus, capital structure is composed of owned funds and borrowed funds.

Question 2.
Debenture trustees is appointed by a company issuing debentures.
Answer:

1. If the company issues prospectus or invites more than 500 people, company has to appoint one or more Debenture Trustees.
2. Companies issuing secured debentures also must appoint Debentures Trustees.
3. Debenture trustees protect the interest of the debenture holders.
4. In case of secured debentures, the charge created on assets of the company is created in favour of the Debenture Trustees.
5. Company has to appoint trustees by entering into a contract with them called as Debenture Trust Deed.
6. Hence, Debenture trustees are appointed by a company issuing debentures.

Question 3.
Companies have to create a charge on their tangible assets while issuing secured deposits.
Answer:

1. Deposits are issued by the company as a means to raise funds for the company.
2. Secured deposits are those for which the company puts up some asset as a guarantee for the deposit in order to provide security to the depositor.
3. If a company offers secured deposits, it has to create a charge on its tangible assets.
4. The charge has to be created within 30 days of acceptance of deposits.
5. Hence, companies have to create a charge on their tangible assets while issuing secured deposits.

Question 4.
Interest is a liability/obligation of the company.
Answer:

1. Interest is the price paid for the capital borrowed by the company.
2. Interest is a charge against the profit of the company.
3. Even if company makes no profit, interest should be paid.
4. It is payable at a fixed and generally pre-determined rate.
5. The company is obligated to pay interest if it has borrowed money from creditors like debenture-holders, Depositors, Bond holders etc.
6. Thus, interest is a liability/obligation of the company.

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

Question 1.
Write a letter to the member for the payment of interim dividend electronically.
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.: ID/1010/19-20

Website: www.zoommotors.com
Email: [email protected]
Date: 2^nd August, 2019

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

Sub: Payment of Interim Dividend through Electronic Clearing Service (ECS), Direct Credit/NEFT

Dear Sir,
We are pleased to inform you that the Board of Directors of the company in its meeting held on 26^th July, 2019 has declared Interim Dividend @ ₹ 1.50/- (i.e. 15%) per equity share of face value of ₹ 10/- each.

As per the instructions given by you (either in person or through Depository Participant), we have remitted the amount of aforesaid Interim Dividend to your Banker for crediting your Bank Account, i.e. dividend will be payable by electronic transfer. The company has complied with all the provisions relating to declaration and payment of dividend.

The details of Dividend Payable to you are as follows:

Please verify the credit of amount in your Pass Book/ Statement of accounts.

As per the provisions of the Income Tax Act, 1961, no tax is required to be deducted at source in respect of dividend payment, but Dividend Distribution Tax has been paid by the company.
Thanking you,

Yours faithfully,
For Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary

Question 2.
Write a letter to debenture holder informing him about conversion of debentures into equity
shares.
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.: CD/1010/20-21

Website: www.zoommotors.com
Email: [email protected]
Date: 10^th June, 2020

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

Sub: Conversion of Debentures into Equity Shares

Dear Sir,
I am directed to inform you that in accordance with the terms decided at the time of issue of 1,00,000, 10% fully convertible debentures, the debentures are due for conversion.

In accordance with the above, a Special Resolution was passed by the shareholders in the Extra Ordinary General Meeting held on 29^th May, 2020 for approval of conversion of debentures into equity shares in the ratio of 2 : 1. As per your Letter of Option, you have been allotted 50 Equity shares in lieu of 100 Debentures.

The details of your holding after conversion are as follows:

Duly signed and executed Share Certificate is enclosed herewith.
Debenture Certificate will be null and void w.e.f. 29^th May, 2020.
Thanking you,

Yours faithfully,
For Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary

Encl: Share Certificate

Question 3.
Draft a letter to depositor regarding repayment of his deposit.
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: Repayment of Fixed Deposit

Dear Sir,
This is to inform you that your Fixed Deposit Receipt No. 123 dated 1^st June, 2018 for ₹ 50,000/- will be due for repayment on 31^st May, 2020.

We have received from you the original Deposit Receipt No. 123 duly discharged along with your instruction for repayment. The Board of Directors in the meeting held on 15^th May, 2020 has passed a resolution for redemption of the deposits.

The details of repayment of deposit are as under:

Please find enclosed herewith a crossed cheque of ₹ 59000, bearing No. 456789 dated 31^st May, 2020 drawn on ICICI Bank, Worli Branch, Mumbai – 400 008.
Thanking you,

Yours faithfully,
For Zoom Motors Ltd.

Sign
Mrs. Priya Prabhu
Company Secretary

Encl: Crossed Cheque No. 456789

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

Question 1.
Explain briefly the different types of shares offered by a company to its existing employees.
Answer:
A company can raise funds by offering shares to its existing employees as follows:

i. Employee Stock Option Scheme (ESOS)

a. 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.

b. 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.

c. 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.

ii. Employee Stock Purchase Scheme (ESPS)

a. Under this scheme, the company offers equity shares to its employees at a discounted price which they can buy at a future date.
b. The company deducts a certain amount from the salary of the employee towards the payment for the shares.
c. A company must fulfil the following provisions:

1. Different number of shares can be offered to different categories of employees.
2. The shares issued through ESPS should be immediately listed.
3. ESPS shares will have a lock-in period of minimum one year from date of allotment if ESPS is not a part of public issue.
4. A company has to fulfil the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.
5. A company has to get the approval of shareholders through Special Resolution to offer ESPS.

iii Stock Appreciation Rights Scheme (SARS)

a. Under this scheme, the employees are given a right to receive appreciation in the value of specified number of shares of the company at a future date.
b. The company allots a specified number of ‘Stock Appreciation Right’ units that are linked to the value of the company’s shares on the date of allotment.
c. On the relevant date i.e. a future date, depending upon the appreciation in the value of shares which are linked to the SAR units, the employee is paid the appreciation value in cash or through equity shares.

E.g.: Mr. X, an employee of ABC Co. Ltd. is allotted ₹ 500 Stock Appreciation Rights when the share price of the company is ₹ 1000 per share. Now, 3 years later, the share price of the company is ₹ 2,000 per share. ABC Co. Ltd. will pay Mr. X an amount of ₹ 5,00,000 [500 × (2000 – 1000)].

d. SARS is a form of bonus compensation given to the employees if the company performs well and its market price of shares goes up.
e. The employee does not have to pay for buying any shares.
f. A company has to give employees a vesting period of minimum one year to exercise his option. There is no lock-in period for SARS.
g. A company has to get the approval of shareholders through Special Resolution to issue SARS.

iv. Sweat Equity Shares

a. Sweat equity shares are shares issued by a company to its directors or employees at a discount or for consideration other than cash.
b. It is issued in recognition of their valuable contribution to the company which has resulted in increased profits.
c. Sweat equity shares rank pari passu (treated at par) with other equity shares.
d. These shares have a lock-in period of three years i.e. they cannot be transferred during this period.
e. A company has to get the approval of shareholders through Special Resolution to issue sweat equity shares.

Question 2.
What is debenture? Discuss the different types of debentures.
Answer:
Debentures are one of the principal sources of raising borrowed capital to meet long and medium term financial needs. Over the years, debentures have occupied a significant position in the financial structure of the companies.

The types of debentures are as follows:

i. Secured Debentures
The debentures can be secured. The property of a company may be charged as security for loan. The security may be for some particular asset (fixed charge) or it may be the assets in general (floating charge). The debentures are secured through ‘Trust Deed’.

ii. Unsecured Debentures
Unsecured debentures have no security. The issue of unsecured debentures is permitted by the Companies Act, 2013.

iii. Registered Debentures
Registered debentures are those debentures on which the names of holders are recorded. A company maintains ‘Register of Debenture holders’ in which the name, address and particulars of holdings of debenture holders are entered.
The transfer of registered debentures requires the execution of regular transfer deed.

iv. Bearer Debentures
The names of holders are not recorded on the bearer debentures. Their names do not appear in the ‘Register of Debenture holders’. Such debentures are transferable by mere delivery. The payment of interest is made by means of coupons attached to debenture certificate.

v. Redeemable Debentures
The redeemable debentures are payable at the end of some fixed period, as mentioned on the debenture certificate. The repayment can be made at fixed date at the end of specific period or by instalment during the life time of the company. The provision of repayment is normally made in ‘Trust Deed’.

vi. Irredeemable Debentures
Irredeemable debentures are not repayable during life time of the company. They are repayable only after the liquidation of the company, or when there is breach of any condition or when some contingency arises.

vii. Convertible Debentures
Convertible debentures give right to holder to convert them into equity shares after a specific period of time. Such right is mentioned on the debenture certificate. The issue of convertible debentures must be approved by Special Resolution in general meeting before they are issued to public. These debentures are advantageous for the holder. Due to this conversion right, convertible debenture holders may benefit from acquisition of equity shares at a rate lower than market value.

viii. Non-Convertible Debentures
Non-convertible debentures are not convertible into equity shares on maturity. These debentures are redeemed on maturity date. These debentures suffer from the disadvantage that there is no appreciation in value.

Maharashtra Board Class 12 SP Previous Year Question Papers