other imp- shares

Question 1

Limited liability

Answer 1

liability of the members is limited to the value of share subscribed or the amount guaranteed to be paid at the time of winding up in case of companies limited by guarantee.

Question 2

Unlimited liability in case of company

Answer 2

in case of companies in cooperated with unlimited liabilities, the liability of the members as unlimited 

Question 3

transferability of shares

Answer 3

In case of unlisted companies and private companies it is regulated by articles of association. otherwise shares are freely transferable in case of companies listed on stock exchange

Question 4

Number of members in case of public company

Answer 4

Minimum number of members is seven without any maximum limit

Question 5

Number of members in case of private company

Answer 5

At least two, but not more than 200 excluding its present or past employee members

Question 6

Number of members in case of one person company

Answer 6

One member

Question 7

liability in case of partnership

Answer 7

Liability of partners is unlimited joint and several

Question 8

interim dividend is declared by the board of directors while proposed i.e final dividend is declared(approved) by the shareholders.

Question 9

accompany can only carry on the business which is permitted by the object clause of its memorandum of association.

Question 10

Do pages 8.3 to 8.5 of book 2

Question 11

Stages of incorporation of a company

Answer 11

promotion

Incorporation or registration

Capital subscription

commencement of Business

Question 12

A company has to obtain commencement of business certificate for which declaration is to be filed within 180 days of it’s incorporation

Question 13

Minimum subscription

Answer 13

section 39(1) of companies act 2013 prescribes that minimum subscription is the amount that the company states in the prospectus which must be subscribed.

SEBI prescribes that accompany must receive minimum subscription of 90% of shares issued for subscription before a lot shares .

At least 90% of the sum payable on application or the minimum subscription stated in the prospectus , which ever is higher, should be received by the company before the shares can be allotted.

Question 14

Minimum subscription not received within the specified period

Answer 14

Application money has to be refunded within 15 days from the closure of the issue

Question 15

Preliminary expenses include

Answer 15

all expenses incurred for incorporating the company such as registration fee legal expenses, preparation of project report, public issue expenses et cetera.

Question 16

preliminary expenses are written off

Answer 16

from security premium, capital reserve and statement of profit and loss(in that order) in the year they were in.

Question 17

PAGE 8.7 and 8.8 book 2

Question 18

companies act 2013 does not permit issue of irredeemable preference shares

Question 19

Subscribed and fully paid up

Answer 19

The company has called up the total total nominal face value of the share and has also received it

Question 20

Subscribed but not fully paid up

Answer 20

The company has called up the total nominal value of the share but has not received it

The company has not called up the total nominal value of the share

The company has not called up the total face value of the share and also the company has not received the amount called up

Question 21

calls in arrears

Answer 21

amount not received by the company

Amount not paid against the amount called towards share capital .

It is shown in notes to accounts and share capital under subscribed capital
(subscribed but not fully paid up)
As a deduction .

Question 22

Calls in advance

Answer 22

if articles of association permits , a company may receive amount against calls yet to be made.

Shown under:
Main head -current liabilities
Subhead -other current liabilities

Question 23

reserve capital

Answer 23

That part of subscribed capital that a company resolves, by a special resolution, not to call except in the event of winding up of the company

Shown under :
subscribed but not fully paid up .

Question 24

Difference between reserve capital and capital reserve on page number 8.15

Question 25

Private placement of shares

Answer 25

issue and allotment of shares to select group of investors privately to raise capital and not to public in general through public issue. These investors usually are banks, mutual funds,venture capitalists and individuals

Question 26

shares can only be issued at par(at nominal or at face value) or at premium(above the nominal or face value)

Question 27

Do page 8.22 of book 2

Question 28

Oversubscription of shares alternatives

Answer 28

excess applications are rejected. Pro rata allotment Combination of the above two alternatives

Question 29

if the question is silent, the surplus application money over and above the amount that is due on allotment is refunded.

Question 30

interest on calls in arrears

Answer 30

if authorised by articles of association a company may charge interest at a specified rate from the due date to the date of payment. otherwise. table F of companies act 2013 provides for interest on calls in arrears at the rate of 10% per annum

Question 31

Revisit page No. 8.51

Question 32

interest on calls in advance

Answer 32

It is paid if articles of association so provide. but if it is silent or does not have a clause to this effect provisions of table F of companies act 2013 apply and the companies liable to pay interest on calls in advance at 12% p.a

Question 33

Authority under articles of association

Answer 33

Calls in Arrears- AOA does not have any clause to this effect as nonpayment is beyond company’s control. Calls in advance -a company may accept calls in advance only if articles of association authorise it to do so

Question 34

purchase consideration is the amount paid by purchasing company for assets or business from other enterprise.

Answer 34

it may be given in the question, otherwise it is equal to net assets(sundry assets- sundry liabilities)

Question 35

purchase consideration> net assets

Answer 35

Difference is debited to Goodwill account

Question 36

purchase consideration< net assets

Answer 36

difference is credited to capital reserve.

Question 37

in purchase of Business entry either Goodwill or capital reserve will appear at a time as a balancing figure.

Question 38

in issue of shares entry, the only account that can come as securities premium a/c

Question 39

Number of shares to be issued=

Answer 39

Purchase consideration/issue price of a share

Question 40

preliminary expenses and underwriting commission are written off in the year there are incurred from securities premium or statement of profit and loss .

Question 41

Number number of shares to be issued

Answer 41

(purchase consideration-payment in cash-payment through promissory note) divided by issue price

Question 42

Forfeiture of shares means cancelling the shares a lot to the shareholders for non-payment of calls amount if the articles of association allows forfeiture

Answer 42

The company has to give notice to the defaulting shareholder to pay the due amount before forfeiting the shares.

Question 43

share capital account is debited with the amount called up on the forfeited shares up to the date of forfeiture. Forfeited shared account is credited by the amount received as share capital on the shares forfeited . Share allotment or share calls account are credited with the amount called up but not paid . If calls in arrears account is maintained, that account is credited

Question 44

amount received by the company whether received towards share capital or premium is not refunded on forfeiture of shares

Answer 44

amt received on share cap- is transferred to forfeited shares account Amount received towards securities premium remains in the securities premium account

Question 45

Amount of share capital account to be debited

Answer 45

Number of shares forfeited x called up value per share

Question 46

while being forfeited if securities premium has not been received, Then the amount of premium credited to the securities premium account but not received on forfeited shares is debited to that account.

Question 47

re-issue of forfeited shares is sale of shares, not an issue of shares

Answer 47

they may be re-issued at par at premium or at discount. Re-issue of forfeited shares, provisions of companies act section 53, of nought permitting issue of shares at discount do not apply. However discount allowed on re-issue of forfeited shares cannot be more than amount forfeited on re-issued shares . Amount forfeited = Maximum permissible discount. Minimum reissue price = called up value- maximum permissible discount

Question 48

preferential allotment

Answer 48

Allotment of shares at a predetermined price to the identified people who are interested in taking shares in the company(promoters, venture capitalists, financial institutions, buyers of companies products or its suppliers) A special resolution has to be passed in the meeting of shareholders before proceeding with preferential allotment

Question 49

sweat equity shares are allowed to be issued at discount. However, a company may issue these shares at par or at premium as it decides.

Question 50

Sweat equity

Answer 50

Equity shares issued by the company towards 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.

Question 51

sweat equity shares is a wider term than employees stock option plan ESOPs restricted to be issued to employees and employee directors whereas a company may issue equity to directors who are not employees of the company.

Question 52

read ESOP page 8.104 of book 2

Question 53

Shares cannot be issued at discount except when they are issued as sweat equity shares