Qualification shares are the minimum number of shares that a person must own, as provided in the articles of the company, in order to qualify to become a director of the company.
Why are qualification shares required?
Qualification shares are required to ensure that the directors have a vested interest in the company. This is because the directors are responsible for managing the company’s affairs and making decisions that affect its shareholders. By requiring the directors to own qualification shares, the company ensures that they have a financial stake in the company’s success.
How are qualification shares acquired?
Qualification shares must be acquired by the director within 2 months of his/her appointment. The articles of the company may prescribe a shorter period. The face value of the qualification shares cannot exceed five thousand rupees, or if the face value of one share is more than five thousand rupees, then one qualification share.
What happens if a director does not acquire qualification shares?
If a director does not acquire qualification shares within the stipulated period, he/she shall be liable to a fine of fifty rupees for every day during which he/she continues to be a director without holding the qualification shares.
MCQs on qualification shares
- The minimum number of shares that a person must own in order to qualify to become a director of a company is called:
- Qualification shares.
- Holding shares.
- Managing shares.
- None of the above.
Answer: The correct answer is (a). Qualification shares are the minimum number of shares that a person must own in order to qualify to become a director of a company.
- Qualification shares must be acquired by the director within:
- 1 month of his/her appointment.
- 2 months of his/her appointment.
- 3 months of his/her appointment.
- 6 months of his/her appointment.
Answer: The correct answer is (b). Qualification shares must be acquired by the director within 2 months of his/her appointment.
- The face value of the qualification shares cannot exceed:
- Five thousand rupees.
- Ten thousand rupees.
- Fifteen thousand rupees.
- Twenty thousand rupees.
Answer: The correct answer is (a). The face value of the qualification shares cannot exceed five thousand rupees.