SEBI Grade A 2022– Companies Act Practice Question | Set- 3

Correct Answer – A. Never more than the issued capital

Explanation: Section 2(86) ―subscribed capital means such part of the capital which is for the time being subscribed by the members of a company; Section 2(50) ―issued capital means such capital as the company issues from time to time for subscription; Explanation: by design subscribed capital <= issued capital; As the public cannot subscribe to more share capital than that which was issued by the company.

Correct Answer – B. By passing a ordinary resolution

Correct Answer – C. Subscribed capital

Explanation: Section 2(86) ―subscribed capital means such part of the capital which is for the time being subscribed by the members of a company; Issued shares are the shares sold to and held by investors of a company. These investors can include large institutions or individual retail investors.

Correct Answer – C. Sweat Equity Shares

Explanation: Section 2(88) ―sweat equity shares‖ means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

Correct Answer – B. Securities premium reserve can be used for writing off expenses on issue of equity shares of the company

Correct Answer – A. Section 2(84)

Explanation: Around 95 definitions are given in Section 2 and they are listed in alphabetical order. Since ‘share’ starts with ‘s’ which comes relatively late in alphabetical order Section 2(84) is the most likely answer.

Correct Answer – D Authorized capital

Explanation: Section 2(8) ―authorised capital or ―nominal capital means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.

Correct Answer – D. 90%

Explanation: The minimum shares the company needs to get from the public out of the total issue by the date of closure. (Presently every company needs to raise 90% of the issued amount). Else, the company shall refund the whole amount received. This 90 % has to be exclusive of the cheques that are not cleared.

Correct Answer –B. 20 years

Explanation: Section 55(2): A company limited by shares may, if so authorised by its articles, issue preference shares which are liable to be redeemed within a period not exceeding twenty years from the date of their issue subject to such conditions as may be prescribed: Provided that a company may issue preference shares for a period exceeding twenty years for infrastructure projects, subject to the redemption of such percentage of shares as may be prescribed on an annual basis at the option of such preferential shareholders

Some students feel that the answer should be 30 years as such period is allowed for infrastructure projects. We are of the opinion that since it is an exception, unless explicitly specified… It should be taken as a company other than an infra company and hence, the answer should be 20 years. It is up to you what answer you chose.

Correct Answer – B. 1 year

Explanation: Section 68(4): Every buy-back shall be completed within a period of one year from the date of passing of the special resolution, or as the case may be, the resolution passed by the Board under clause (b) of subsection (2).