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CS Professional · Strategic Management and Corporate Finance · Raising of Funds - Private Funding

Kaveri Textiles Ltd received application money on 1 March under a private placement but could not allot securities. Counting sixty days from receipt of money, what must it do under Section 42 to avoid liability for interest at 12% per annum?

The company must repay the application money within fifteen days after the sixty-day allotment period expires. If it fails, it must repay with interest at twelve per cent per annum from the sixtieth day, as Section 42(6) provides.

  1. ARepay the application money within fifteen days from the expiry of the sixty daysCorrect
  2. BRepay the application money within thirty days from the expiry of the sixty days
  3. CRepay the application money within sixty days from the expiry of the sixty days
  4. DRepay the application money within fifteen days from the date of receipt

Explanation

Section 42(6) requires allotment within sixty days of receipt of application money. Failing that, the money must be repaid within fifteen days from the expiry of sixty days. Otherwise the company must repay with interest at 12% per annum from the expiry of the sixtieth day. Thirty days is the refund period after a penalty order under Section 42(10), not this one.

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