SEBI Grade A 2020

Company Law
Important MCQs - Chapter IV
Share Capital and Debentures – Part 3

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 Question 1
Which of the following is not a condition for buy back of shares by the company?

a) Authorisation in AOA
b) Special Resolution at GM of the company
c) Shares bought back should be fully paid up
d) Company need the approval of its debentureholders before buyback.

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 Explanation to Q 1
Section 68 --> Power of Company to Purchase its own securities

Conditions for buyback

1. Authorisation in Article of Association

2. Shares to be bought back must be fully paid up
3. Special resolution at General Meeting of the company.
4. For listed company, follow the regulations of SEBI in this behalf
5. No buyback within a period of 1 year from the date of the closure of the preceding offer of buyback.

Maximum shares that can be bought back-

You have to check the 3 conditions below and calculate the maximum shares bought back according to the three conditions.
The LEAST of the three shall be the number of shares company can buyback.

a) Buy back is 25% or less of the aggregate paidup capital and free reserves of the company
b) The maximum equity shares that can be bought back in a financial year can be maximum 25% of the total number of
outstanding shares.
c) Post buyback the company has to maintain a debt equity ratio of 2:1.

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 Explanation to Q 1
If the buyback is for 10 % or less of the paid up equity capital and free reserves of the company, then
 No need of Special Resolution. Only Board Resolution is sufficient.

6. Buyback shall be completed within 1 year of the date of passing of Special Resolution or Board Resolution as the
case maybe.
7. Buyback can be done from –
• Existing security holders on proportionate basis
• Open market
• The employees of the company to whom security issues under ESOP or sweat equity.

8. Before buyback, company shall file with ROC & SEBI a DECLARATION OF SOLVENCY signed by atleast 2 directors ,
one of whom shall be managing director. The Declaration shall state that company has made full enquiry that
companies is capable of paying its liabilities and will not be declared insolvent within 1 year from date of
declaration adopted by the board. (No filing to SEBI in case of unlisted companies)

9. Securities bought back shall be extinguished and physically destroyed within 7 days of last day of completion of
buyback.
 Question 1
Which of the following is not a condition for buy back of shares by the company?

a) Authorisation in AOA
b) Special Resolution at GM of the company
c) Shares bought back should be fully paid up
d) Company need the approval of its debentureholders before buyback.

Answer - D

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 Question 2
If the buyback by the company is ________or less, the company need not pass the Special Resolution.

a) 10%
b) 15%
c) 20%
d) 25%

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 Explanation to Q 2
If the buyback is for 10 % or less of the paid up equity capital and free reserves of the company, then
 No need of Special Resolution. Only Board Resolution is sufficient.

6. Buyback shall be completed within 1 year of the date of passing of Special Resolution or Board Resolution as the
case maybe.
7. Buyback can be done from –
• Existing security holders on proportionate basis
• Open market
• The employees of the company to whom security issues under ESOP or sweat equity.

8. Before buyback, company shall file with ROC & SEBI a DECLARATION OF SOLVENCY signed by atleast 2 directors ,
one of whom shall be managing director. The Declaration shall state that company has made full enquiry that
companies is capable of paying its liabilities and will not be declared insolvent within 1 year from date of
declaration adopted by the board. (No filing to SEBI in case of unlisted companies)

9. Securities bought back shall be extinguished and physically destroyed within 7 days of last day of completion of
buyback.

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 Question 2
If the buyback by the company is ________or less, the company need not pass the Special Resolution.

a) 10%
b) 15%
c) 20%
d) 25%

Answer - A

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 Question 3
Buyback shall be completed within _______of passing of Special Resolution.

a) 3 months
b) 6 months
c) 9 months
d) 1 year

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 Explanation to Q 3
If the buyback is for 10 % or less of the paid up equity capital and free reserves of the company, then
 No need of Special Resolution. Only Board Resolution is sufficient.

6. Buyback shall be completed within 1 year of the date of passing of Special Resolution or Board Resolution as the
case maybe.
7. Buyback can be done from –
• Existing security holders on proportionate basis
• Open market
• The employees of the company to whom security issues under ESOP or sweat equity.

8. Before buyback, company shall file with ROC & SEBI a DECLARATION OF SOLVENCY signed by atleast 2 directors ,
one of whom shall be managing director. The Declaration shall state that company has made full enquiry that
companies is capable of paying its liabilities and will not be declared insolvent within 1 year from date of
declaration adopted by the board. (No filing to SEBI in case of unlisted companies)

9. Securities bought back shall be extinguished and physically destroyed within 7 days of last day of completion of
buyback.

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 Question 3
Buyback shall be completed within _______of passing of Special Resolution.

a) 3 months
b) 6 months
c) 9 months
d) 1 year

Answer - D

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 Question 4
If any person deceitfully personates as an owner of any security, and obtains any such security or any money, he shall be
punishable with maximum fine of Rs._______.

a) 1 Lac
b) 2 Lac
c) 5 Lac
d) 10 Lac

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 Explanation to Q 4
Section 57-->Punishment of Personation of shareholder

He shall be punishable with

and thereby obtains or attempts Imprisonment-->
If any person deceitfully personates to obtain any such security or Minimum one year
as an owner of any security receives or attempts to receive Maximum three years and
any money due to any such owner Fine-->
Minimum one lakh rupees
Maximum five lakh rupees.

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 Question 4
If any person deceitfully personates as an owner of any security, and obtains any such security or any money, he shall be
punishable with maximum fine of Rs._______.

a) 1 Lac
b) 2 Lac
c) 5 Lac
d) 10 Lac

Answer - C

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 Question 5
In case of allotment of debenture, the certificate shall be delivered to that person within _______________ from the
date of allotment.

a) 1 months
b) 2 months
c) 3 months
d) 6 months

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 Explanation to Q 5

Section 56--> Transfer and Transmission of Securities

Every company shall deliver the certificates of all securities allotted, transferred or transmitted as follows.

In the case of a transfer or

transmission of securities-->
In the case of subscribers in the case of any Within a period of one month In the case of any
to the memorandum--> allotment of any of its from the date of receipt by allotment of debenture-->
Within a period of two shares-->Within a period the company of the Within a period of six
months from the date of of two months from the instrument of transfer or months from the date of
incorporation. date of allotment. intimation of transmission. allotment.

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 Question 5
In case of allotment of debenture, the certificate shall be delivered to that person within _______________ from the
date of allotment.

a) 1 months
b) 2 months
c) 3 months
d) 6 months

Answer - D

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 Question 6
In case of Infrastructure companies, the maximum period for which the preference shares can be issued is
_______________.

a) 10 years
b) 20 years
c) 30 years
d) 25 years

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 Explanation to Q 6

Section 55--> Issue and Redemption of Preference shares

Some Important Points regarding issue of preference shares

a) Irredeemable Preference shares cannot be issued.
b) Preference shares can be issued for a maximum period of 20 years from the date of their issue.(Exception:- In case
of company involved in infrastructure projects, the maximum period is 30 years but from in this case, from 21st year
every year atleast 10% shares shall be redeemed)

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 Question 6
In case of Infrastructure companies, the maximum period for which the preference shares can be issued is
_______________.

a) 10 years
b) 20 years
c) 30 years
d) 25 years

Answer - C

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 Question 7
The form for share certificate is______

a) SH 1
b) SH 2
c) SH 3
d) SH 4

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 Explanation to Q 7

Section 46 --> Certificate of shares

Provisions regarding certificate of shares

 A certificate of shares duly signed and sealed shall be prima facie evidence of the title of the person to such shares.
 Share certificate shall be in Form No. SH 1
 Where share is held in demat form, the record of the depository shall be prima facie evidence of the interest of the
beneficial owner.

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 Question 7
The form for share certificate is______

a) SH 1
b) SH 2
c) SH 3
d) SH 4

Answer - A

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