Strategic Management and Corporate Finance · Raising of Funds from Equity and Procedural Aspects - Public Funding

Allotment, Listing and Post-Issue Compliances in a Public Issue

Updated 11 October 2026 · Fact-checked

After a public issue closes, the company must allot shares only if the minimum subscription is received, finalise a fair basis of allotment, refund unallotted money, get shares listed on the stock exchange, and meet post-issue duties such as filing returns and reporting fund use. You answer by stating the provision, applying the facts, and concluding.

Understand Allotment, Listing and Post-Issue Compliances

A public issue does not end when bids close. The company must now turn applications into shares in a lawful way. This stage has three parts: allotment, listing and post-issue compliance.

Allotment is the company's decision to issue shares to applicants. Under Section 39, no allotment of securities offered to the public can be made unless the minimum amount stated in the prospectus has been subscribed and the application money has been received by the company by cheque or other instrument. The amount payable on application must be at least 5% of the nominal amount of the security, or such other percentage or amount as SEBI specifies by regulations.

If the minimum amount is not subscribed, and the application sum is not received, within 30 days from the date of issue of the prospectus (or such other period as SEBI specifies), the money received must be returned in the time and manner prescribed. Many students stop at the Act. In an answer, also mention that SEBI's ICDR rules set the detailed timelines and the basis-of-allotment mechanics for IPOs. State these as SEBI rules without quoting numbers you are unsure of.

Listing comes next. Under Section 40(1), every company making a public offer must, before making the offer, apply to one or more recognised stock exchanges for permission to deal in the securities. If the prospectus says such an application has been made, it must also name the exchange or exchanges (Section 40(2)). So the permission is sought before the offer, not after allotment.

Application money from the public must be kept in a separate bank account in a scheduled bank (Section 40(3)). It can be used only to adjust against allotment where the securities have been permitted to be dealt with on the exchange named in the prospectus, or to repay applicants where the company cannot allot. Any condition that makes an applicant waive these requirements is void (Section 40(4)).

Post-issue compliance covers filing the return of allotment with the Registrar (Section 39(4)), refunds, credit of shares to demat accounts, listing and trading, and reporting on how the money raised is used. SEBI's rules for IPOs require a monitoring agency for larger issues and periodic statements on use of proceeds. Check the exact thresholds in your study material before quoting them.

Key rules to remember

Minimum subscription condition: Allotment allowed only if: minimum amount stated in prospectus subscribed AND application sums received; Section 39(1). Applies to securities offered to the public for subscription.
Minimum application money: Application money ≥ 5% of nominal amount (or other percentage/amount specified by SEBI); Section 39(2). Example: ₹10 share, application money at least ₹0.50 unless SEBI specifies otherwise.
Refund trigger: Minimum not subscribed within 30 days of prospectus issue (or SEBI period) → return money; Section 39(3). Money is returned in the time and manner prescribed.
Return of allotment: Company making any allotment → file return of allotment with Registrar; Section 39(4). The prescribed manner and time are in the Rules.
Penalty for default under Section 39(3) or (4): ₹1,000 per day of default or ₹1,00,000, whichever is less; Section 39(5). Applies to the company and every officer in default.
Listing permission: Apply to recognised stock exchange(s) BEFORE making the public offer; Section 40(1). The prospectus must name the exchange(s) where the application is made (Section 40(2)).
Use of application money: Separate account in a scheduled bank; use only for allotment adjustment or repayment; Section 40(3). Allotment adjustment is allowed only where the exchange has permitted dealing.
Penalty for default under Section 40: Company: fine ₹5,00,000 to ₹50,00,000. Officer in default: fine ₹50,000 to ₹3,00,000; Section 40(5). Imprisonment was removed by Act 29 of 2020.
Proportionate allotment in oversubscription: Shares to allot to a category = Shares available ÷ Shares applied × Shares applied by the applicant; Working rule for a basis of allotment. SEBI's ICDR rules set the category-wise method and marketable lots.

How to solve Allotment, Listing and Post-Issue Compliances questions

Use this order for any question on allotment, listing or post-issue duties. It keeps your answer in the provision, analysis, conclusion format.

1Identify the stage: allotment, refund, listing or post-issue reporting. Say so in your first line.
2State the rule with its exact condition, for example minimum subscription under Section 39(1) or prior listing application under Section 40(1).
3List the facts given: shares offered, shares applied for, minimum subscription, dates, amounts received.
4Test the facts against the rule. Check the minimum amount, the 30-day period, the application money percentage and the separate account.
5If the issue is oversubscribed, work out the proportionate allotment: shares available ÷ shares applied for, then apply it to each applicant, and handle fractions by rounding as per the exchange or SEBI basis.
6Compute any refund as application money paid minus money adjusted against shares allotted.
7State the consequence of default: the penalty under Section 39(5) or Section 40(5), or the refund duty.
8Conclude in one line and add the practical compliance steps: return of allotment, demat credit, listing, and reporting on use of funds.

Quickest way: Rule, facts, number, conclusion

When to use it: Use when you have about 10 minutes for a 10-mark case question and cannot write a full essay.

Write the section number and the rule in one sentence.
Underline the key numbers in the case: offered, applied, minimum, days elapsed.
Do the one calculation needed, such as allotment ratio or refund amount.
Write the conclusion and the penalty or the refund consequence.
Close with two compliance steps: return of allotment and listing or reporting.

Common mistakes in Allotment, Listing and Post-Issue Compliances

Saying the company applies for listing after allotment is complete.
Students follow the real-life order of trading starting after allotment.
Fix: Remember Section 40(1): the application to the exchange is made before the public offer, and the prospectus names the exchange.
Treating Section 42 rules on private placement as applicable to a public issue.
Both sections deal with allotment and returns, so rules get mixed up.
Fix: Use Sections 39 and 40 for public offers. Section 42 requires allotment within 60 days of receipt of the application money, repayment within 15 days from the expiry of those 60 days, and a return of allotment within 15 days of allotment (Section 42(8)). These apply only to private placement.
Quoting the wrong penalty for Section 39 defaults.
Students recall the Section 42(9) penalty of ₹1,000 a day up to ₹25 lakh.
Fix: Section 39(5) covers only defaults under Section 39(3) (refund of money) and Section 39(4) (return of allotment). The penalty is ₹1,000 per day of default or ₹1 lakh, whichever is less. Section 40(5) is a separate provision for defaults under Section 40: a fine of ₹5 lakh to ₹50 lakh on the company.
Allotting without checking minimum subscription because the issue is oversubscribed overall.
Students think oversubscription solves everything.
Fix: Check the minimum amount stated in the prospectus and that the sums payable on application have been received before any allotment.
Using application money for business needs before listing permission is in place.
Students overlook that the money sits in a special account.
Fix: Under Section 40(3), keep the money in a separate scheduled bank account and use it only for adjustment against allotment (where dealing is permitted) or for repayment.
Rounding allotment to exact proportion and ignoring marketable lot rules.
Textbook ratios give fractions, and students leave them in the answer.
Fix: State that fractions are adjusted as per the basis of allotment approved with the exchange and SEBI rules, and show whole shares in your answer.

Worked examples

Example 1

Sunrise Foods Ltd offers 10,00,000 equity shares of ₹10 each to the public. The prospectus states a minimum subscription of 90% of the offer. Applications received are for only 8,00,000 shares. Can the company allot? What happens to the money, and under which section?

Show the solution

Minimum amount stated: 90% of 10,00,000 = 9,00,000 shares.
Subscription received: 8,00,000 shares, which is less than 9,00,000.
Under Section 39(1), no allotment can be made unless the minimum amount stated in the prospectus has been subscribed and application sums received.
Section 39(3): if the minimum is not subscribed within 30 days from the date of issue of the prospectus (or the period SEBI specifies), the amount received must be returned in the prescribed time and manner.
If the company defaults in the return, Section 39(5) applies: penalty of ₹1,000 per day of default or ₹1,00,000, whichever is less, on the company and every officer in default.

Answer: No. Subscription of 8,00,000 shares is below the minimum of 9,00,000 shares, so the company cannot allot. It must refund all application money in the prescribed time and manner, failing which Section 39(5) penalties apply.

Example 2

Greenfield Energy Ltd offers 1,00,000 shares of ₹10 face value each in a category, issued at ₹50 per share (₹40 premium), payable in full on application. It receives applications for 4,00,000 shares. Rohan applied for 2,000 shares and paid ₹50 per share. Assume allotment is strictly proportionate with whole shares. How many shares are allotted to Rohan and how much is refunded?

Show the solution

Ratio of allotment = shares available ÷ shares applied for = 1,00,000 ÷ 4,00,000 = 1 : 4.
Rohan's allotment = 2,000 × 1/4 = 500 shares.
Amount paid by Rohan = 2,000 × ₹50 = ₹1,00,000.
Amount adjusted against allotment = 500 × ₹50 = ₹25,000.
Refund = ₹1,00,000 − ₹25,000 = ₹75,000.
Practical points: refund the unallotted money, credit shares to his demat account, and the company files the return of allotment with the Registrar under Section 39(4).

Answer: Rohan is allotted 500 shares and receives a refund of ₹75,000.

Exam tips

Quote Sections 39 and 40 by number. The thresholds are exact: 30 days, 5%, ₹1,000 per day, ₹1 lakh, ₹5 lakh to ₹50 lakh.
For oversubscription questions, show the ratio first, then each applicant's shares, then the refund. Marks go for each step.
Write the provision, analysis and conclusion in separate short paragraphs for case-based questions.
Keep public issue rules apart from private placement in Section 42. A comparison line can earn extra marks.
For post-issue compliance, name the return of allotment, refunds, demat credit, listing and reporting on use of proceeds, and say that SEBI regulations give the detailed timelines.

Practice questions from Raising of Funds from Equity and Procedural Aspects - Public Funding

Allotment, Listing and Post-Issue Compliances in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveIssue Process: Allotment, Listing and Intermediaries

Allotment, Listing and Post-Issue Compliances: frequently asked questions

What is minimum subscription under the Companies Act, 2013?

It is the minimum amount stated in the prospectus that must be subscribed before any allotment. Section 39(1) bars allotment until this amount is subscribed and the application sums are received by the company. If it is not reached within 30 days of the prospectus date, or the period SEBI specifies, the money must be returned.

When must the company apply for listing of shares?

Before making the public offer. Section 40(1) requires the company to apply to one or more recognised stock exchanges and obtain permission for the securities to be dealt with. The prospectus must name the exchange or exchanges where the application has been made.

What happens to application money if the shares cannot be allotted?

It must be refunded. Under Section 40(3), the money is held in a separate account in a scheduled bank and can be used only for adjustment against allotment or for repayment. The time for repayment is set by SEBI. Defaults attract penalty under Sections 39 and 40.

How is basis of allotment decided when an IPO is oversubscribed?

It is decided in consultation with the stock exchange and as per SEBI's rules, using proportionate allotment within each investor category. You divide shares available by shares applied for, apply the ratio to each applicant and adjust for fractions and marketable lots. Check the category rules in your study material.