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

Under the mutual assistance principles for a Producer Company as given in the Companies Act, 2013, which of the following must the articles of the company contain in relation to debt finance?

The articles of a Producer Company must contain the amount of reserves, sources from which funds may be raised, limitation on raising of funds, restriction on their use, and the extent of debt that may be contracted with conditions. This is required under section 378G(3)(j).

  1. AOnly a statement that the company cannot borrow
  2. BThe amount of reserves, sources from which funds may be raised, limitation on raising of funds, restriction on the use of such funds and the extent of debt that may be contracted and the conditions thereofCorrect
  3. CA requirement that all borrowings be approved by the Registrar
  4. DA fixed ceiling of five per cent of average net profits on borrowings

Explanation

Section 378G(3)(j) requires the articles to specify the amount of reserves, sources of funds, limits on raising funds, restrictions on their use and the extent of debt and conditions. The five per cent figure relates to charitable contributions under section 181, not borrowings. No Registrar approval for borrowings is mentioned.

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