CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities
Karthik Textiles Ltd allotted shares to the public. The shares were to be listed on a recognised stock exchange, and the prospectus stated that an application had been made for listing. The stock exchange rejected the listing application on the 10th day after the closing of the subscription list. What is the effect on the allotment under the Companies Act, 2013?
The allotment is void. Where the stock exchange refuses permission to deal in the securities offered under the prospectus, the allotment is treated as void and the company must repay all application money within the prescribed time. Delay makes the directors jointly and severally liable with interest.
- AThe allotment is valid and the company need only pay interest
- BThe allotment is void, and the company must repay all application money received within the prescribed timeCorrect
- CThe allotment becomes voidable only at the option of the company
- DThe allotment stands valid provided the shareholders ratify it in a general meeting
Explanation
If permission for dealing on the stock exchange is refused, any allotment made on the basis of that prospectus becomes void. The company must repay the money received from applicants within the prescribed time, failing which directors are liable to repay with interest. It is not a matter for ratification by members.
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.
More Prospectus and Allotment of Securities questions
- Pioneer Foods Ltd. made a public offer through a prospectus. Anita applied for shares after relying on an expert's report included in the pr…
- Nirmal Textiles Ltd, an unlisted public company, issues a prospectus inviting the public to subscribe to its equity shares. A director, Mr. …
- Kaveri Infra Ltd, a public company, made a public offer and its prospectus stated that shares would be listed on a recognised stock exchange…
- Kaveri Infra Ltd, an unlisted public company, issued a prospectus. The prospectus was issued on 10 July, and the company wants to know about…
- Orchid Infra Ltd, an unlisted public company, allotted shares to a subscriber. The company later discovered that the allotment was made to a…
- Sunrise Agro Ltd, an unlisted public company, plans to invite the public to subscribe to its shares. Before issuing its prospectus to the pu…