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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Debt and Procedural Aspects

Kaveri Engineering Ltd, a public company, accepted secured deposits from the public on 10 June. By which date must it create a charge on its assets in favour of the depositors, and for what minimum amount?

The company must create a charge on its assets in favour of deposit holders within thirty days of accepting the secured deposits, and the charge must be for an amount not less than the deposits accepted. The twenty per cent and 30 April rule concerns the repayment reserve, not security.

  1. AWithin 30 days of acceptance, for an amount not less than the deposits acceptedCorrect
  2. BWithin 60 days of acceptance, for an amount not less than the deposits accepted
  3. CWithin 30 days of acceptance, for 50% of the deposits accepted
  4. DBefore the next 30 April, for 20% of the deposits accepted

Explanation

The second proviso to section 76(1) requires a company accepting secured deposits from the public to create, within thirty days of acceptance, a charge on its assets of not less than the amount of deposits accepted. The 20% and 30 April figures relate to the deposit repayment reserve account, not the charge, so that option is a mix-up.

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