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

Kaveri Foods Ltd, a public company, made a public offer of shares. The issue closed and the company received applications. Under the Companies Act, 2013, which of the following is the correct position regarding minimum subscription and refund of application money?

If the minimum subscription stated in the prospectus is not received within the prescribed period, the company must refund the application money within the prescribed time. If it fails, the directors are jointly and severally liable to repay with interest. Retaining the money or waiting for SEBI is not allowed.

  1. AMinimum subscription is not required for public companies under the Act
  2. BIf the minimum amount stated in the prospectus is not received within the prescribed period after issue of the prospectus, application money must be returned within the prescribed time, failing which directors are jointly and severally liable to repay with interestCorrect
  3. CApplication money may be retained by the company indefinitely and adjusted against the next issue
  4. DRefund is required only if SEBI directs it in writing

Explanation

Allotment cannot proceed unless the minimum subscription stated in the prospectus is received within the prescribed period. If not, money must be refunded within the prescribed time, and directors become jointly and severally liable to repay with interest if they default. Retaining the money indefinitely is not permitted.

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