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Test: Share Capital- 5 - B Com MCQ


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10 Questions MCQ Test - Test: Share Capital- 5

Test: Share Capital- 5 for B Com 2024 is part of B Com preparation. The Test: Share Capital- 5 questions and answers have been prepared according to the B Com exam syllabus.The Test: Share Capital- 5 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Share Capital- 5 below.
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Test: Share Capital- 5 - Question 1
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What is the primary advantage of issuing bonus shares for a company?

Detailed Solution for Test: Share Capital- 5 - Question 1
Issuing bonus shares allows a company to capitalize its profits and distribute them among existing shareholders without affecting fund flow. Since bonus shares are given for free, there is no additional financial burden on shareholders. This action increases the number of shares but doesn't change the company's overall value, as the market value per share is adjusted accordingly.
Test: Share Capital- 5 - Question 2
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According to Section 63(1), which of the following is NOT a valid source from which a company can issue bonus shares?

Detailed Solution for Test: Share Capital- 5 - Question 2
According to Section 63(1), a company can issue fully paid-up bonus shares out of its free reserves, securities premium account, or capital redemption reserve account. However, reserves created by revaluation of assets cannot be used for issuing bonus shares.
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Test: Share Capital- 5 - Question 3
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When are the rights in bonus shares vested to the shareholders?

Detailed Solution for Test: Share Capital- 5 - Question 3
The rights in bonus shares are vested to the shareholders when the bonus shares are actually allotted, not from any earlier date. This means that shareholders gain ownership and entitlement to the bonus shares at the time they are officially allotted.
Test: Share Capital- 5 - Question 4
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Under what conditions can a company issue shares at a discount?
Detailed Solution for Test: Share Capital- 5 - Question 4
Shares can be issued at a discount, but there are conditions. One of these conditions is that the shares must belong to a class already issued. This means that the company cannot create a new class of shares solely for issuing shares at a discount.
Test: Share Capital- 5 - Question 5
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According to Rule 8(1) of Companies (Share Capital and Debentures) Rules, 2014, who is eligible to receive sweat equity shares?
Detailed Solution for Test: Share Capital- 5 - Question 5
According to Rule 8(1), sweat equity shares can be issued to permanent employees of the company who have been working in India or outside India for at least the last one year. It also includes directors of the company, whether whole-time directors or not.
Test: Share Capital- 5 - Question 6
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What is the maximum percentage of existing paid-up equity share capital for which a company can issue sweat equity shares in a year?
Detailed Solution for Test: Share Capital- 5 - Question 6
As per Rule 8(4), a company can issue sweat equity shares for up to 15% of the existing paid-up equity share capital in a year or shares of the issue value of rupees five crores, whichever is higher. The total issuance of sweat equity shares cannot exceed 25% of the paid-up equity capital of the company at any time.
Test: Share Capital- 5 - Question 7
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What is the minimum period that must have elapsed from the date a company commenced business for it to issue sweat equity shares?
Detailed Solution for Test: Share Capital- 5 - Question 7
As per the conditions outlined, at least one year must have elapsed from the date on which the company had commenced business before it can issue sweat equity shares.
Test: Share Capital- 5 - Question 8
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How long are sweat equity shares typically locked or non-transferable?
Detailed Solution for Test: Share Capital- 5 - Question 8
Sweat equity shares issued to directors or employees are typically locked or non-transferable for a period of three years from the date of allotment. This helps ensure that the individuals receiving the shares stay associated with the company for a certain period.
Test: Share Capital- 5 - Question 9
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What is the purpose of the valuation report obtained for sweat equity shares?
Detailed Solution for Test: Share Capital- 5 - Question 9
The valuation report obtained for sweat equity shares is used to justify the fair price of the shares being issued. This report helps ensure that the valuation of the shares is reasonable and justifiable, especially when the shares are being issued at a discount or for non-cash consideration.
Test: Share Capital- 5 - Question 10
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What information should the explanatory statement to a special resolution for issuing sweat equity shares contain?
Detailed Solution for Test: Share Capital- 5 - Question 10
The explanatory statement to a special resolution for issuing sweat equity shares should contain details such as the reasons or justification for the issue, the class of shares under which the sweat equity shares will be issued, the total number of shares to be issued, the terms and conditions of the issue, and other relevant particulars. This information helps shareholders make informed decisions about the issuance of sweat equity shares.
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