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

Meridian Textiles Ltd. made a public offer and stated in its prospectus that the minimum subscription would be collected. The company received applications for only 80% of the minimum subscription within the prescribed period after issue of the prospectus. Which statement correctly states the position under the Companies Act, 2013?

The company cannot allot shares because the minimum subscription was not received in time. All application money must be refunded within the prescribed period, and if the company fails to do so, its directors are jointly and severally liable to repay the money with interest.

  1. AThe company may allot shares to the applicants and collect the balance later by private placement
  2. BThe company may allot shares after obtaining the Registrar's permission for the shortfall
  3. CThe company cannot allot; application money must be returned, and failure to repay within the prescribed time makes directors jointly and severally liable to repay with interestCorrect
  4. DThe company may allot shares if the promoters bring in the shortfall after allotment

Explanation

Allotment cannot be made unless the minimum subscription stated in the prospectus has been received within the prescribed period. When it is not received, the application money must be returned within the prescribed time. If repayment is delayed, directors become jointly and severally liable to repay with interest. The other options allow allotment despite the shortfall, which the law prohibits.

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