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CS Executive · Capital Market and Securities Laws · Issue of Capital and Disclosure Requirements

Himalaya Foods Ltd issues a prospectus for a public offer of shares. The prospectus states a minimum subscription amount. By the date of closing, the stated minimum has not been subscribed. Under the Companies Act, 2013, what is the position about allotment?

No allotment can be made unless the minimum amount stated in the prospectus has been subscribed and the sums payable on application have been received by the company. Allotting on whatever is subscribed or relying on later promoter funding is not permitted for a public offer.

  1. ANo allotment can be made unless the minimum amount stated in the prospectus has been subscribed and the application sums receivedCorrect
  2. BAllotment can be made to the extent of whatever has been subscribed
  3. CAllotment can be made if the promoters agree to bring in the shortfall later
  4. DAllotment can be made after informing the Registrar within 15 days

Explanation

Section 39(1) bars any allotment of securities offered to the public unless the minimum amount stated in the prospectus has been subscribed and the application sums have been paid to and received by the company. Partial allotment or later promoter funding does not cure the shortfall.

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