04 October 2013
Compliance for the first time allotment of shares offered to public for subscription Following conditions are applicable to first allotment of shares offered for subscription:— (i) Minimum subscription.—Section 69(1) provides that no allotment shall be made of any share capital of a company offered to the public for subscription, unless the amount stated in the prospectus as minimum amount has been raised and the sum payable on application for the amount so decided by the Board has been paid to, and received by the company, whether in cash or by a cheque or other instrument which has been paid. This amount of minimum subscription will be exclusive of any amount payable otherwise than in money. (ii) Minimum amount payable on application.—Section 69(3), state that the amount payable on application on each share shall not be less than twenty five per cent of the nominal amount of the share. As per the amendment made by SEBI on 28-5-2004 vide Circular No. SEBI/CFD/DIL/DIP/ 13/2004/28/5, it has now been decided that the minimum application value shall be within the range of Rs. 5,000 to Rs. 7,000. For example, if the issue price of the share is Rs. 500, the minimum application size would range from 10 shares to 14 shares. Applications can be made in multiples of minimum size/value. (iii) Requirement for deposit of application money in a bank account.—Section 69(4) provides that all moneys received from applicants for shares shall be deposited and kept deposited in a Scheduled Bank:— (a) until the certificate to commence business is obtained under section 149, or (b) where such certificate has already been obtained, until the entire amount payable on applications for shares in, in respect of the minimum subscription has been received by the company. It is important to note that application moneys received by a company do not constitute a part of its paid up capital.
(iv) Repayment of share application money and penalty in case of default.—If the company fails to obtain the entire amount payable on applications for shares in respect of minimum subscription on the expiry of 120 days without interest after the issue of prospectus then the company shall forthwith repay all moneys received from applicants for shares with interest at the rate of six per cent p.a. from the expiry of 130 days. [Section 69(5)] In case default is made in depositing or keeping deposited the application money received, in a Scheduled Bank or in repayment of application money without interest on expiry of 120 days, every promoter, director or any other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to fifty thousand rupees. It has also been provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part. (v) Binding nature of compliance with section 69 cannot be waived.—Section 69(6) states that any condition purporting to require or bind any applicant for shares, to waive compliance with any requirements of section 69 shall be void. (vi) Registration of statement in lieu of prospectus.—A company having a share capital which does not issue a prospectus on or with reference to its formation, or which has issued a prospectus but has not proceeded to allot any of the shares offered to public for subscription shall deliver a statement in lieu of prospectus to the Registrar for registration at least three days before the first allotment of its shares or securities. [Section 70(1)]
04 October 2013
Time period for opening of subscription lists:
Section 72(1)(a) provides that no allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally, and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the fifth day after the date on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus: The expression 'issued generally' has also been defined under section 2(22) of the Act as follows:—
"Issued generally" means, in relation to a prospectus, issued to persons irrespective of their being existing members or debenture-holders of the body corporate to which the prospectus relates.
04 October 2013
Manner of reckoning days for opening of subscription list:
Section 74 of the Act, specifies that in reckoning the fifth day, if any intervening day is a public holiday under the Negotiable Instruments Act, 1881, then it shall be disregarded and if the fifth day itself is a public holiday, then the first day thereafter, which is not a public holiday shall be substituted therefor. The day on which the prospectus is first issued generally refers to the day on which it is first issued as a newspaper advertisement. If prospectus is first issued in any manner other than as a newspaper advertisement then the day on which prospectus is so issued in any other manner shall be deemed to be the day on which the prospectus is first issued generally, provided it is not issued generally as a newspaper advertisement before the fifth day after its issuance in any other manner.
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