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CA Foundation · Business Laws · The Companies Act, 2013

Anand Infra Ltd's public issue closed, but it received subscriptions below the minimum subscription stated in the prospectus. Under the Act, which statement is correct regarding the application money?

If the minimum subscription is not received, the application money must be refunded within the prescribed time. If the company fails to refund in time, the directors are jointly and severally liable to repay it with interest. A board resolution cannot permit allotment without the minimum subscription.

  1. AIt must be refunded within the prescribed time, and if refund is delayed beyond that period the directors become jointly and severally liable to repay with interestCorrect
  2. BThe company may retain it for 12 months and wait for further subscriptions
  3. CThe company may allot shares anyway if the board passes a resolution
  4. DOnly the promoters are liable to refund, and only without interest

Explanation

If the minimum subscription stated in the prospectus is not received within the prescribed period, the amount must be returned. If it is not repaid within the prescribed time, the directors of the company are jointly and severally liable to repay it with interest. A board resolution cannot override the minimum subscription condition.

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