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is minimum subscription 90%(Co. act 1956) or amount stated in prospectus(Co. act 2013)???

23 August 2018

Co. act 2013,
39(1)"no allotment of securities offered to the public for subscriptttion shall be made,unless the *amount stated in the prospectus as minimum amount* is subscribed"......
~Hence,the amount stated in the prospectus as minimum amount is to be subscribed,for making allotment~
1)right!!????
2)and not 90%???!!
~i am asking this because, there is an example in the ICAI corporate laws material,Co. act 2013
Qn:After receiving 80% of the minimum subscriptttion as stated in the prospectus,the co. made allotment to Mr.X.
Ans:the co. violated the co. act 2013 39(1).
🙄🙄🙄🙄how???!!!!???!!!

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8 Replies

Ruchika Somani (Coaching and Practice in Tax Audit Law.) (4429 Points)
Replied 23 August 2018

Companies act 2013 will pertain that is minimum amount specified in prospectus shall be subscribed

1 Like

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Santhosh Gundinahole (Studnet) (347 Points)
Replied 23 August 2018

Companies Act, 2013 given power to SEBI under 3 major areas. Where SEBI provisions will prevail against provisions of companies Act. Those areas are
Chapter III- Issue of securities to public,
Chapter IV- Transfer of securities
Sec 127- Non payment of divinded.

If anything comes under these chapters, we must refer to SEBI regulations. Here in your query matter referring to chapter III, Issue of securities.
Hence while you are preparing Prospectus, you must follow the provisions of SEBI (ICDR) Regulations.

In SEBI ICDR regulations, it is clearly mentioned that minimum subscripttion shall not be less than 90% of issue size, same should be reproduced in prospectus also. Since company got subscripttion only 80% of issue size and allotted shares to Mr. X in spite of minimum subscripttion. Hence you there is clear violation in provisions of companies Act, 2013. which shall amount to unlimited liability to promotors for this act.

Clear?

2 Like

Anush Ram (160 Points)
Replied 23 August 2018

@ Santhosh and Ruchika
yes,clear brother!..,thank you sister..
thank you so much for sharing your fruitful knowledge!
however.....my nearby friends explained it like this!😀😀😅😅
say,1000 shares each 100
$1,00,000
hence minimum subscripttion is 90% =$90,000(funny thing is,they don't know where comes the 90%)
From the example,it has to interpreted like this:-
"after receiving 80% of the minimum subscripttion"
(I.e 90,000×80%=72,000) !!!!!!!😅😅😅🙄🙄🙄😂😂😂
hence it is violation right????
thus,the co. has to receive bal. 20%($18,000) to fulfill the criterion!

(Guest)

Agreed with Shri Santosh

Santhosh Gundinahole (Studnet) (347 Points)
Replied 23 August 2018

Thank you for your appreciation.

FYI
1. Logics won't work where law prescribe the procedures specifically, if not specified then you are allowed logic for some extent.
2. Whenever there is concept of public issue of securities, SEBI ICDR regulations will come into picture.

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Anush Ram (160 Points)
Replied 23 August 2018

Ok....!
I shall keep that in mind!😀😀

Priya Kashyap (Student) (7048 Points)
Replied 18 March 2019

first of all question nicely framed 👍
your frnds told everything I knew

Indira Priyadarsini Kota (Practice) (590 Points)
Replied 20 January 2021

Sir, What will be the status of the prospectus since it has violated Company Law? What will happen if any of the public has subscribed to the shares issued from such prospectus?