Question

If a company fails to receive minimum subscription within 120 days from the date of issue of the prospectus, in how many days should company refund the amount of application money from the date of issue of Prospectus?

• A. 150 days
• B. 230 days
• C. 130 days
• D. 120 days

Hint:

To remember the timeline:
• 120 days is the "waiting" period to see if the money comes in.
• 10 days more (Total 130) is the "grace" period to return the money to investors if the target wasn't met.

Answer 1

The Correct Option is C

Concept: Minimum subscription is the minimum amount of capital that a company must receive from the public through applications before it can proceed with the allotment of shares. This is a legal safeguard to ensure the company has enough funds to carry out its basic operations.

Step 1: Understanding the statutory timeline for refunds.
there are specific rules governing the failure to meet this minimum requirement:
• Deadline for Subscription: A company must receive the minimum subscription within 120 days from the date of issue of the prospectus.
• Refund Period: If the company fails to receive this amount within the 120-day window, it must refund the entire application money received.
• Final Deadline: According to Section 39 of the Companies Act, if the minimum subscription is not met, the application money must be repaid within 130 days from the date of issue of the prospectus. Failure to refund the amount within this 130-day period (10 days after the subscription window closes) makes the directors liable to repay the money with interest.