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:

Minimum subscription rule is a direct MCQ trap: 120 days = collection period, 130 days = refund deadline.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
According to the Companies Act, if a company does not receive the minimum subscription as specified in the prospectus within 120 days of the issue of the prospectus, it is required to refund the entire application money to the applicants.
Step 2: Key Formula or Approach:
The law stipulates a specific timeframe for the refund process:
- Maximum time to receive minimum subscription = 120 days.
- Deadline for refund = 10 days after the expiry of those 120 days.
Step 3: Detailed Explanation:
If the company fails to reach the subscription target by the 120th day, it must initiate the refund process immediately.
The statute mandates that the money must be returned within 10 days following the 120-day limit.
Therefore, the total duration from the date of issue of the prospectus is \( 120 + 10 = 130 \) days.
Step 4: Final Answer:
The company should refund the amount within 130 days from the date of issue of the prospectus.