Skip to content

CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities

Anita applied for shares in Lotus Retail Ltd. on the strength of its prospectus. Which of the following correctly describes a rule about applications and allotment of securities in a public offer under the Companies Act, 2013?

A person who makes an application for securities in a fictitious name, or induces allotment in such a name, is punishable under the Companies Act, 2013. The company cannot cure this by a later return, and commission and abridged prospectus requirements also remain mandatory.

  1. AA company may accept an application for shares in a fictitious name, provided it files a return later
  2. BA person who makes an application in a fictitious name to a company for acquiring securities is punishable under the ActCorrect
  3. CSecurities may be allotted to an applicant even where the application form is not accompanied by the abridged prospectus
  4. DThe company may pay any commission to anyone for subscribing, regardless of any limits or disclosure

Explanation

The Act punishes a person who makes an application in a fictitious name, or otherwise induces a company to allot securities to him in a fictitious name. Option A is wrong because such applications cannot be validated by a later return. Option C is wrong because the application form must be accompanied by the abridged prospectus. Option D is wrong because commission is allowed only within prescribed limits and subject to disclosure.

Did you get it right without looking?

One question tells you little. A timed set on Prospectus and Allotment of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Prospectus and Allotment of SecuritiesFree diagnostic mock

More Prospectus and Allotment of Securities questions