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CMA Intermediate · Business Laws and Ethics · Company Types, Promotion, Formation and Related Procedures

Kisan Agro Producer Company Ltd. paid its promoters Rs 2,40,000 for registration fees, legal fees and printing of memorandum and articles. Under section 378C, what is the position on this reimbursement?

The company may reimburse the promoters for direct costs of promotion and registration, such as registration and legal fees and printing of the memorandum and articles, but the payment is subject to approval at its first general meeting of Members.

  1. AIt is allowed only if the Registrar approves it
  2. BIt may be reimbursed, subject to approval at the company's first general meeting of MembersCorrect
  3. CIt is prohibited because promoters cannot be reimbursed
  4. DIt needs prior Central Government approval because it exceeds Rs 1,00,000

Explanation

Section 378C(4) permits reimbursement of direct promotion and registration costs, including registration, legal fees and printing of memorandum and articles, with payment subject to approval at the first general meeting of Members. No Registrar or Central Government approval or monetary threshold is stated.

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