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

Kaveri Ltd, a public company, offered shares to the public. The minimum subscription stated in the prospectus was not received within the prescribed period after the issue of the prospectus. What is the correct consequence under the Companies Act, 2013?

If minimum subscription is not received within the prescribed time, the company must refund all application money. If it fails to repay within the prescribed time, the directors become jointly and severally liable to repay it with interest. Allotment on a lower amount is not permitted.

  1. AThe company may allot shares on whatever amount has been received
  2. BThe company must refund all application money received, and if not repaid within the prescribed time, directors are jointly and severally liable to repay with interestCorrect
  3. CThe Registrar will allot shares on the company's behalf
  4. DThe company may keep the money for one year and then refund it

Explanation

If the minimum subscription is not received within the prescribed period, all application money must be returned. On default, directors are jointly and severally liable to repay with interest as prescribed. Allotting on a lesser amount or retaining money breaches the rule.

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