CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities
Kaveri Textiles Ltd, a public company, opened its public issue and received applications. The prospectus stated that shares would be listed on a recognised stock exchange. The company applied to a recognised stock exchange for listing, but the exchange refused permission to deal in the shares. Which statement reflects the correct legal position on the allotment?
If the stock exchange refuses permission to deal in the shares, or permission is not granted within the statutory period, the allotment becomes void. The company must repay all application money received within the prescribed time, and delay attracts interest liability on the company and defaulting officers.
- AAllotment already made remains valid and the company can retain the money until it reapplies
- BThe company must repay all application money received within the prescribed time, and the allotment becomes voidCorrect
- CThe allottees must wait for one year before claiming a refund
- DThe company may keep the money and issue debentures in place of shares without consent
Explanation
Where permission for dealing on a stock exchange is refused, or not granted before the prescribed period from the closing of the issue, the allotment becomes void and the company must repay the application money within the prescribed time. Failing which, the company and officers are liable to pay interest. Option A is wrong as the allotment is void.
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