CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities
Orchid Beverages Ltd, a public company, issued a prospectus and made allotment. Mr. Dev, an applicant, wants to know the effect of the allotment where the company failed to obtain listing permission from the stock exchange as it had stated it would apply for. What is the correct position?
The allotment is void if the stock exchange permission mentioned in the prospectus is refused or not granted within the prescribed period. The company must then repay all money received from applicants, and directors become liable to pay interest if repayment is delayed.
- AIf the permission is not granted before the prescribed period expires, the allotment is void and the company must repay the money receivedCorrect
- BThe allotment remains valid and the company need not repay anything
- CThe allotment is valid only for Dev and void for others
- DThe allotment is voidable only at the option of the Registrar
Explanation
Where a prospectus states that application has been made for permission to deal on a stock exchange, and the permission is refused or not granted within the prescribed time, the allotment becomes void. The company must repay the money received within the prescribed time, failing which directors are liable to pay interest.
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