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

Zenith Pharma Ltd., a public company, allotted shares after a public issue. Applicants paid money into a separate bank account as required, but the company's CFO withdrew application money from that account before the Registrar had been given the return of allotment and before the listing permission was obtained. Application was made to a recognised stock exchange for listing. The permission was later refused. Which statement is correct?

When listing permission is refused, the allotment becomes void and the company must refund all money within the prescribed time, with directors jointly and severally liable to pay interest on delay. Application money must stay in a separate bank account until listing permission is obtained, so the early withdrawal was improper.

1. AThe allotment remains valid and the company need only repay the money after one year
2. BThe allotment is void only if the company fails to apply for listing; refusal of permission has no effect
3. CThe allotment is voidable by the allottees after one year of refusal
4. DThe allotment becomes void, and the company must repay the money received from applicants within the prescribed time, failing which directors are liable jointly and severally with interest; the money should have been kept in a separate bank account until listing permissionCorrect