Statutory Conditions of Allotment of Shares. - Secretarial Practice

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Answer in Brief

Statutory conditions of allotment of shares.

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The act prescribes several (1) Statutory (2) General conditions related to allotment of shares by a company as follows:

(1) Registration of Prospectus:

Copy of prospectus should be filed with ROC or copy of statement in lieu of prospectus if capital was raised privately.

(2) Application Money:

Minimum of 5% of the face value of shares should e taken by company as application money. i.e. money payable with application of shares.

(3) Minimum subscription:

Allotment of shares cannot begin if minimum subscription of 90% of issued capital is not collected. If not, company will have to refund the entire application money collected.

(4) Deposit of Application money:

The application money remains with the specially opened account with a scheduled bank in ‘Share Application Money A/c” and cannot be withdrawn by company.

(5) Oversubscription:

SEBI nominee be appointed to assist in allotment when there is oversubscription to decide on criteria and refunding.

(6) Permission to deal on Stock Exchange:

Company offering shares to public by prospectus should make application to 1 or more recognized stock exchange for listing.

(7) Beginning the allotment procedure:

Opening of subscription list can start after 5 days of opening the issue (in case of filing of prospectus) and within 3 days (in case of filing statement in lieu of prospectus). This enables the member of public to go through the prospectus thoroughly & decide.

(8) Closing of subscription list:

Though not clear - cut provisions are there about closing the list, SEBI guidelines state that issue be open for minimum 3 and maximum 7 working days. In case of Right issue, the subscription list be open for not more than 60 (sixty) days.

Concept: Allotment
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2014-2015 (March)

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