Statutory conditions of allotment of shares.
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money remains with the specially opened account with a scheduled bank in ‘Share Application Money A/c” and cannot be withdrawn by company.
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.