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

Which statement about utilising money raised through a private placement under Section 42 is correct?

Monies raised can be utilised only after allotment is made and the return of allotment has been filed with the Registrar. Until then, application money stays in a separate scheduled bank account usable only for adjustment against allotment or refund.

  1. AIt may be used once the application is received, if kept in a separate account
  2. BIt may be used only after allotment is made and the return of allotment is filed with the RegistrarCorrect
  3. CIt may be used immediately after the Board identifies the persons
  4. DIt may be used after allotment even before filing the return of allotment

Explanation

The proviso to Section 42(4) bars use of the monies unless allotment is made and the return of allotment is filed under sub-section (8). Application money must meanwhile sit in a separate scheduled bank account, usable only for adjustment against allotment or refund. Allotment alone is not enough.

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