Section 42 Actions: Private Placement Compliance
Section 42 of the Companies Act, 2013 governs the procedure for Private Placement of securities. This method allows companies to raise capital from a select group of individuals or entities, bypassing public offers.
Analyzing Options for Section 42
We need to identify which action is permissible under the rules of Section 42.
- Option 1 Analysis: Issuing advertisements in local newspapers is prohibited under Section 42. Private placement is meant for a restricted audience, and public advertising circumvents this principle.
- Option 2 Analysis: Receiving subscription money in cash is generally not permitted. Payments are typically required through specified banking channels like cheques, demand drafts, or electronic transfers, as detailed in relevant rules.
- Option 3 Analysis: Rule 14(7) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, linked to Section 42, states that the private placement offer must be subscribed within sixty days of its issuance. If not subscribed within this period, the company must refund the money. This implies that the allotment process is expected to occur within or be initiated based on this 60-day subscription period. Therefore, allotting shares within sixty days of the offer date aligns with the regulatory timeline for subscription.
- Option 4 Analysis: Section 42(2) specifies that an offer can be made to not more than two hundred persons (or as prescribed) for each class of security in a financial year, excluding Qualified Institutional Buyers. Fifty persons is below this limit but is not the defining condition. The key is that the offer is restricted and not public. However, the specific limit mentioned (fifty) is not the core provision being tested here in the context of permissible actions. The rule focuses on the *maximum* allowed number.
Conclusion on Permissible Action
Based on the analysis, the most accurate action permitted within the framework of Section 42 and its associated rules is related to the timeline for allotment following the offer.
The correct action is The share can be allotted within sixty days of the date of offer.
Important Questions from The Companies Act, 2013
Match List I with List II:
List- I
List – II
A.
Appointment of auditors by CAG (I)
Section 139 (5) B.
Qualifications and disqualifications of auditors (II)
Section 141 C.
Powers-and duties of auditors (III)
Section 142 D.
Remuneration of auditors (IV)
Section 143
Choose the correct answer from the options given below -Which one of the following nature of business is suitable to a Dormant company?
Which of the following companies do not fall under a purview of Dormant company?
(A) Private company
(B) One person company
(C) Limited and unlimited liability companies
(D) Public company
(E) Government company
Choose the most appropriate answer from the options given below:
Given below are two statements: One is labelled as Assertion A and the other is labelled as Reason R.
Assertion (A): Provision is made to obtain the status of a ‘dormant company for a inactive company that doesn't trade.
Reasons (R): Dormant company doesn't trade but has significant accounting transaction.
In the light of the above statements, choose the most appropriate answer from the options given below -
Dormant company offers excellent advantage to which one of the following?
