Class 12 Secretarial Practice Chapter 6: Correspondence with Members

Key concepts: Correspondence with Members

Role of the Secretary

The Secretary is the link between Directors and Members and passes on the decisions of the management to the members by writing to them.

Share certificate

A registered document of title to shares, issued under the common seal, signed by at least two Directors and countersigned by the Secretary.

Dividend

The part of the company's profits that is distributed to shareholders. Final dividend is approved at the AGM; interim dividend is declared by the Board.

Dividend warrant

The instrument sent with the dividend letter for paying dividend. Dividend can also be paid electronically through ECS or NEFT.

Bonus shares

Fully paid shares given free to existing equity shareholders, in proportion to their holding, out of accumulated profits or reserves.

Record date

The cut-off date used to decide which registered shareholders are eligible for benefits such as dividend and bonus shares.

Precautions in member letters

Correct information, lucid language, prompt response, secrecy, politeness, legal compliance, consideration and a good image of the company.

Reply on low dividend

A letter to a dissatisfied member, sent after his complaint, explaining the reasons why the rate of dividend was low.

Quick revision: important points

• Share certificate must be issued within two months after allotment.
• Dividend must be paid within 30 days from the date of declaration.
• Final dividend: approved at the AGM. Interim dividend: declared by the Board during the year.
• Bonus shares are free; a 1:1 ratio means one extra share for each share held on the record date.
• Eight precautions: correct, lucid, prompt, secrecy, polite, legal, consideration, company image.

Practice MCQs with answers

1. Who acts as the link between the Board of Directors and the Members of a company?

   1. Auditor
   2. Company Secretary
   3. Registrar of Companies
   4. Debenture Trustee
   Show answer

   Answer: B. Company Secretary
   The Secretary communicates the decisions of the management to the members through correspondence.

2. A Secretary tactfully answers a member's letter without revealing confidential company information. Which precaution is being followed?

   1. Promptness
   2. Politeness
   3. Secrecy
   4. Consideration
   Show answer

   Answer: C. Secrecy
   Secrecy means not disclosing secret or confidential information of the company to members.

3. Within what time after allotment must a company issue or dispatch the share certificate to the allottee?

   1. Two months
   2. Three months
   3. Five months
   4. Six months
   Show answer

   Answer: A. Two months
   The share certificate has to be issued within two months after the allotment of shares.

4. A share certificate is issued under the common seal and is signed by:

   1. The Secretary alone
   2. One Director and the auditor
   3. The allottee and one Director
   4. At least two Directors and countersigned by the Secretary
   Show answer

   Answer: D. At least two Directors and countersigned by the Secretary
   Two Directors sign it and the Secretary countersigns it, so it becomes a valid document of title.

5. As per the SEBI circular, companies should send share certificates to the allottee by:

   1. Ordinary post
   2. Registered post
   3. Telegram
   4. Notice on the company board
   Show answer

   Answer: B. Registered post
   Registered post is required so that delivery of the certificate can be proved.

All Class 12 Secretarial Practice chapters

• Chapter 1: Introduction to Corporate Finance
• Chapter 2: Sources of Corporate Finance
• Chapter 3: Issue of Shares
• Chapter 4: Issue of Debentures
• Chapter 5: Deposits
• Chapter 6: Correspondence with Members
• Chapter 7: Correspondence with Debentureholders
• Chapter 8: Correspondence with Depositors
• Chapter 9: Depository System
• Chapter 10: Dividend and Interest
• Chapter 11: Financial Market
• Chapter 12: Stock Exchange

Class 12 Secretarial Practice notes: all chapters