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

Kaveri Pharma Ltd, a public company, made a public offer of shares and received applications. It wishes to allot the shares. Which of the following is the correct position about the minimum subscription and application money under the Companies Act, 2013?

A company making a public offer cannot allot shares until the minimum subscription disclosed in the prospectus has been received. If that amount is not received within the prescribed period, the application money must be refunded. Director approval cannot waive this requirement, which applies to public offers rather than private placement.

  1. AThe company cannot allot shares unless the minimum subscription stated in the prospectus has been received, and if it is not received within the prescribed period the application money must be refundedCorrect
  2. BThe company may allot shares even if the minimum subscription is not received, provided the directors approve
  3. CMinimum subscription is required only for private placement
  4. DMinimum subscription is fixed by the Registrar after receiving applications

Explanation

The Act requires that no allotment be made on a public offer unless the minimum subscription stated in the prospectus has been received, and application money is to be held in a separate bank account until allotment. If the minimum is not received within the prescribed period from the issue of the prospectus, the money must be returned. Option B is wrong because director approval cannot override the requirement. Option C reverses the scope, and D wrongly gives the Registrar the role of fixing it.

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