Home › CA Inter › corporatelaws › Private Placement Application Money › Under a private-placement offer, the company mus…
Under a private-placement offer, the company must NOT use the application money for any purpose other than:
APaying dividend
BAllotting securities or refunding the application money
CRepaying existing borrowings
DGranting loans to directors
Answer & Solution
Correct answer: B. Allotting securities or refunding the application money
1. Section 42(6) requires the application money to be kept in a separate bank account and used ONLY for allotment or refund.
2. Any other use triggers a fine of up to Rs 2 crore.
3. Hence (B).
_Source: ICAI BoS CA Inter Paper 2 — Prospectus and Allotment_