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CA Foundation · Business Laws · The Companies Act, 2013

Vikram Ltd, a public company, made a public offer and received applications. Under the Companies Act, 2013, which is the rule about money received from applicants before allotment?

Application money must be held in a separate account with a scheduled bank. It may be used only to adjust against allotment of securities or to repay applicants if allotment is not made. The company cannot use it for working capital or promoters' expenses before allotment.

  1. AIt must be kept in a separate bank account in a scheduled bank and used only for adjusting against allotment or repaying applicantsCorrect
  2. BIt may be used immediately for the company's working capital
  3. CIt can be used to pay preliminary expenses incurred by promoters
  4. DIt must be handed over to the promoters as security

Explanation

All application money received must be deposited and kept in a separate bank account with a scheduled bank. It can be used only for adjustment against allotment of securities or for repayment where securities are not allotted. Using it for working capital or promoters' expenses is prohibited before allotment is properly done.

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