Companies Act Section 39 — Allotment of securities by company
CHAPTER III PROSPECTUS AND ALLOTMENT OF SECURITIES
Commercial / Corporate
Summary
Sub-section (1) states that a company cannot allot securities to the public unless the minimum amount mentioned in the prospectus has been fully subscribed, and the money payable on application for that amount has been paid to and received by the company through a cheque or other payment instrument.
Sub-section (2) provides that the amount payable on application for each security must be at least five per cent of its nominal value, unless the Securities and Exchange Board specifies a different percentage or amount through its regulations.
Sub-section (3) says that if the stated minimum amount is not subscribed and the application money is not received within thirty days from the date the prospectus is issued, or within any other period set by the Securities and Exchange Board, then the money received under sub-section (1) must be returned within the time and in the manner prescribed.
Sub-section (4) requires that whenever a company with share capital makes any allotment of securities, it must file a return of allotment with the Registrar in the prescribed manner.
Sub-section (5) states that if there is a default under sub-section (3) or sub-section (4), the company and its officer who is in default will be liable to a penalty of one thousand rupees for each day the default continues, or one lakh rupees, whichever is less, for each default.
Official Text
(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.
(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.
(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.
(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.
(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.