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    Question

    As per Companies Act 2013, a company can vary the

    objects for which the prospectus was issued and raise capital from the public for any of the following purposes except _____
    A Expansion of existing capacity Correct Answer Incorrect Answer
    B Repayment of Debt Correct Answer Incorrect Answer
    C General corporate purposes Correct Answer Incorrect Answer
    D Buying equity shares of another listed company Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    A company may issue securities for different reasons; the main reason being raising capital to meet its financial requirements. The financial requirements can be starting a venture, repaying debts, expansion and diversification. Or any other general corporate purposes. Note – As per Section 27 of Companies Act 2013 – variation in Prospectus - company has to use funds strictly in accordance with the prospectus. Deviations are required to be pre-approved in general meeting by way of special resolution ; however deviation regarding use of issue proceeds for buying, trading, or otherwise dealing in equity shares of any other listed company is NOT permitted.  

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