Companies Act, 2013 · Chapter III: Prospectus And Allotment Of Securities · In force
This section regulates the allotment of securities by companies, ensuring that minimum subscription requirements are met and returns are filed with the Registrar.
What the section says
In plain terms
(1)No allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument.
A company cannot allot securities offered to the public unless the minimum amount stated in the prospectus is subscribed and the initial payment is received by the company by cheque or other instrument.
(2)The amount payable on application on every security shall not be less than five per cent. of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf.
The initial payment for each security must be at least 5 per cent of its nominal amount, or a higher percentage or amount set by the Securities and Exchange Board.
(3)If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed.
If the minimum amount is not subscribed within 30 days of the prospectus issue, or a different period set by the Securities and Exchange Board, the company must return the received payments.
(4)Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed.
When a company with share capital allots securities, it must file a return of allotment with the Registrar in a prescribed manner.
(5)In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.
If a company fails to return payments or file a return of allotment, it and its defaulting officer are liable to a penalty of 1,000 rupees per day or 1 lakh rupees, whichever is less.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.