Utilisation of share application money under Rights Issue

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Under the Companies Act 2013, it is not permissible to utilise share application money before the allotment of shares in a Rights Issue. This differs from previous regulations under the old Companies Act, where such practices were sometimes allowed for private placements. Section 42 of the current Act explicitly prohibits using these funds until the allotment process is complete.

Lekha Dattatray Mahindre

Lekha Dattatray Mahindre (Querist)
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11 April 2020 Can we utilise share application money before allotment of shares under Rights Issue?

Eswar Reddy S

Eswar Reddy S (Expert)
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17 April 2020 Earlier, under old Companies Act regime, many companies accepted share application money under private placement and utilized the same for the business purpose even without allotment of shares. ... Now, Section 42 of the Companies Act, 2013 puts prohibition over the said practic

Eswar Reddy S

Eswar Reddy S (Expert)
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17 April 2020 So share application money cannot be utilised before completion of allotment proceeding