Read the passage carefully and answer the following questions.
XYZ Ltd is registered with an authorised capital of ₹20 lakh divided into 2 lakh equity shares of ₹10 each. The company is in manufacturing of pickles and spices. Due to the increase in demand of packed food in the market they decided to diversify its operation. For this purpose they decided to issue 1 lakh equity share of ₹10 each. The company issued 20,000 equity shares to a vendor to supply the machinery required to manufacture the packed food. Rest of the equity shares were issued to general public for subscription. The application were received for 46,000 equity shares. Due to undersubscription of equity shares the shares were not issued to public.
The company issued 20,000 equity shares of ₹ 10 each to vendor. After issuing them the shares the vendor will be considered as:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Owners
Once the 20,000 equity shares are allotted, the vendor is a shareholder of XYZ Ltd. The capital of a company is contributed by its shareholders, and they are its real owners. How the shares were paid for (by supplying machinery) does not change this.
Why the other options are incorrect
Option (1) Creditors — Incorrect. The vendor was a creditor only until the shares were allotted; the allotment of shares settles the amount due to him.
Option (3) Customer — Incorrect. The vendor sold machinery to the company; he did not buy anything from it.
Option (4) Lender — Incorrect. A lender gives a loan and is repaid with interest; equity shares are owned capital, not a loan.
NCERT (2026-27 edition):
|
