SEBI Grade A 2020

Company Law
Important MCQs - Chapter IV
Share Capital & Debentures – Part 1

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 Question 1
The basic difference between Preference shares and equity shares are that Preference share holders have a priority of
_________________________over equity shareholders.

a) Payment of Dividend
b) Repayment of capital at the time of winding up
c) Both of the above
d) None of the above

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 Explanation to Q 1
Equity Shares Preference Shares

They will get dividend after preference They will get dividend in priority to equity
shareholders shareholders

The rate of dividend is fluctuating The rate of dividend is fixed

They have a last right for repayment of capital at They have a prior right over equity shareholders
the time of winding up. for repayment of capital at the time of winding
up.

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 Question 1
The basic difference between Preference shares and equity shares are that Preference share holders have a priority of
_________________________over equity shareholders.

a) Payment of Dividend
b) Repayment of capital at the time of winding up
c) Both of the above
d) None of the above

Answer - C

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 Question 2
Shares & Debentures are______________________

a) Movable property
b) Immovable property
c) Fictitious assets
d) None of the above

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 Explanation to Q 2

Section 44--> Shares & Debentures in a company shall be movable property transferable in manner provided in
the articles of the company.

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 Question 2
Shares & Debentures are______________________

a) Movable property
b) Immovable property
c) Fictitious assets
d) None of the above

Answer - A

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 Question 3
If a company issues duplicate shares with intent to defraud any person, the maximum penalty on the company shall
be_________________ or 10 crores whichever is higher.

a) 5 times the face value of shares

b) 5 times the market value of shares
c) 10 times the face value of shares
d) 10 times the market value of shares

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 Explanation to Q 3

Section 46--> Certificate of shares

The company shall be punishable with fine

If a company with intent to defraud
issues a duplicate certificate of
shares
Minimum-5 times the face value of the shares involved in the issue of
the duplicate certificate
Maximum-10 times the face value of such shares or rupees ten crores
whichever is higher

Every officer of the company who is in default shall be liable for

action under section 447.

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 Question 3
If a company issues duplicate shares with intent to defraud any person, the maximum penalty on the company shall
be_________________ or 10 crores whichever is higher.

a) 5 times the face value of shares

b) 5 times the market value of shares
c) 10 times the face value of shares
d) 10 times the market value of shares

Answer - C

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 Question 4
When the dividend in respect of a class of preference shares has not been paid for a period of ______________years,
such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

a) 2
b) 3
c) 4
d) 5

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 Explanation to Q 4
Section 47--> Voting Rights

Preference shareholders shall have a right to vote only on resolutions placed before the company
a) which directly affect the rights attached to his preference shares and,
b) any resolution for the winding up of the company or for the repayment or reduction of its equity or
preference share capital.

But when the dividend in respect of a class of preference shares has not been paid for a period of two years or more
-->such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

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 Question 4
When the dividend in respect of a class of preference shares has not been paid for a period of ______________years,
such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

a) 2
b) 3
c) 4
d) 5

Answer - A

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 Question 5
If the dissenting shareholders did not consent to variation of shareholders’ rights, they may apply to Tribunal for getting
variation cancelled. In this context, what do you mean by dissenting shareholders?

a) Holders of minimum ten per cent of the issued shares of a class who did not consent to such variation
b) Holders of minimum fifteen per cent of the issued shares of a class who did not consent to such variation
c) Holders of minimum twenty five per cent of the issued shares of a class who did not consent to such variation
d) Holders of minimum fifty per cent of the issued shares of a class who did not consent to such variation

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 Explanation to Q 5
Section 48--> Variation of Shareholders’ Rights

a) Consent of 3/4th shareholders of such shares.

Where the company wishes to vary b) Consent of three-fourths of such other class of
rights of a class of shares shareholders whose rights are also being affected.

Where holders of minimum ten per cent of the issued shares of a class did not consent to such variation or vote in
favour of the special resolution for the variation, they may apply to the Tribunal to have the variation cancelled.

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 Question 5
If the dissenting shareholders did not consent to variation of shareholders’ rights, they may apply to Tribunal for getting
variation cancelled. In this context, what do you mean by dissenting shareholders?

a) Holders of minimum ten per cent of the issued shares of a class who did not consent to such variation
b) Holders of minimum fifteen per cent of the issued shares of a class who did not consent to such variation
c) Holders of minimum twenty five per cent of the issued shares of a class who did not consent to such variation
d) Holders of minimum fifty per cent of the issued shares of a class who did not consent to such variation

Answer - A

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 Question 6
Securities premium is the difference between____________

a) Issue Price and Face Value

b) Issue Price and Discounted Price
c) Market Price and Issue Price
d) Market price and Discounted price

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 Explanation to Q 6
Example:- If a company issues 1000 shares of face value Rs.10 each at Rs.12 per share, then the securities premium
account is_______________.

Ans- Face value = Rs. 10

Issue Price = Rs. 12
Securities premium = IP-FV = 12-10= Rs.2 per share
Total securities premium = Rs.2*1000= Rs.2000

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 Question 6
Securities premium is the difference between____________

a) Issue Price and Face Value

b) Issue Price and Discounted Price
c) Market Price and Issue Price
d) Market price and Discounted price

Answer - A

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 Question 7
For which of the following purpose can a company not use its securities premium account?

a) Writing off preliminary expenses

b) Buyback of shares
c) Issuing partly paid bonus shares
d) Writing off discount allowed on issue of debentures of company

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 Explanation to Q 7
Section 52--> Application of Premiums received on issue of shares

Uses of securities premium account

Issue of fully paid bonus Writing off preliminary

shares expenses

Writing off discount and

commission allowed on
Buy Back of shares issue of shares or
debentures
Providing for the premium on
the redemption of preference
shares or debentures.

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 Question 7
For which of the following purpose can a company not use its securities premium account?

a) Writing off preliminary expenses

b) Buyback of shares
c) Issuing partly paid bonus shares
d) Writing off discount allowed on issue of debentures of company

Answer - C

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THANK YOU

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