Skip to content

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

Zenith Realty Ltd, a public company, invited the public to subscribe to its shares through a prospectus. Mr. Gopal, a stockbroker, applied for shares in a fictitious name to induce the company to allot shares to him and later sold them. Under the Companies Act, 2013, which statement is correct?

Gopal is liable for personation for acquisition of securities, which is treated as fraud under the Companies Act, 2013. Applying for shares in a fictitious name to induce allotment is an offence, and paying the application money does not remove the liability.

  1. AGopal is liable for fraud, being a person who makes an application in a fictitious name to acquire securities, and faces action under the provisions on personation for acquisition of securitiesCorrect
  2. BGopal commits no offence because he finally paid the application money
  3. COnly the company, not Gopal, can be penalised
  4. DGopal is liable only if shares were allotted to a minor

Explanation

The Act penalises a person who makes an application in a fictitious name, or otherwise induces a company to allot securities to him, as personation for acquisition of securities, treated as fraud. Payment of the money is no defence. The offence is by the applicant, so the company alone is not the target.

Did you get it right without looking?

One question tells you little. A timed set on Prospectus and Allotment of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Prospectus and Allotment of SecuritiesFree diagnostic mock

More Prospectus and Allotment of Securities questions