Final answer:
Both statements about the issuance of bonus shares and the removal and replacement of a director are correct. Statement (1) accurately describes that issuing bonus shares without consideration is legal, while statement (2) correctly outlines the process of director removal and replacement. Option B
Step-by-step explanation:
When analyzing the question's statements, we must carefully consider the law and common corporate governance practices regarding directors and the shareholders. For statement (1), the issuance of watered stocks, which are shares issued at a value less than their true value, is indeed illegal as it misrepresents the capital received by the company.
However, issuing shares without monetary consideration, known as bonus shares, is legal and a common practice; these shares are typically distributed to existing shareholders based on their current holdings. Therefore, statement (1) is correct.
As for statement (2), the process for removing a director from a company often requires a shareholder vote. The specific threshold may vary by jurisdiction or the company's own bylaws, but a supermajority of 2/3rd is a commonly accepted standard for such decisions.
Once removed, vacancies may indeed be filled by the majority vote of the remaining directors, provided they still form a quorum, aligning with common corporate governance rules. This means that statement (2) is also correct.
Given the correctness of both statements, the answer to the question is (B) Both are correct.