Page 206 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 10: Share Capital

monies received from applicants for shares must be forthwith repaid to them without interest. In Notes
case any such money is not repaid within next 8 days [10 days as per Sec. 69], the company shall
be liable to repay the same with interest which is, presently, 15 per cent per annum [6 per cent
per annum as per s. 69].
Statement in lieu of Prospectus (Section 70). Where a public company invites public subscription,

it must file a prospectus with the Registrar, before making the allotment. In case, the public

company arranges capital privately, it must file a statement in lieu of prospectus with the
Registrar at least three days before the first allotment is made. The Statement should be in the

prescribed form and must contain the particulars and reports set out in Schedule III.
The aforesaid provisions of s. 70 do not apply to a private company.
Opening of the Subscription List (Section 72). No allotment shall be made of shares applied for in
pursuance of the prospectus until the beginning of the fifth day after that on which the prospectus

is issued (or such later time as specified in the prospectus itself). This is called the opening of the
subscription list. As mentioned above, an applicant cannot withdraw his application until after
the expiration of the fifth day of the opening of the subscription list.

Closing of the Subscription List. Although Companies Act is silent as to the time for which the
subscription list must be kept open, SEBI’s Guidelines, 2000 provide that the subscription list for
public issue must be kept open for at least 3 working days and for not more than 10 working days.
However, public issues of infrastructure companies may be kept open for 21 working days.
Listing of Shares (Section 73). No allotment of share can be made unless the provisions of s. 73
are complied with. Every company, intending to offer shares or debentures to the public for
subscription by the issue of a prospectus shall, before such issue, make an application to one
or more recognized stock exchanges for permission for the shares or debentures intending to
be so offered to be dealt in on the stock exchange or each such stock exchange. Further where a
prospectus states that an application has been made for permission for the shares or debentures
offered thereby to be dealt in one or more recognized stock exchange, then the allotment shall be
void if the permission has not been granted by the stock exchange or each such stock exchange, as
the case may be, before the expiry of ten weeks from the date of closing of the subscription list.

If permission has not been granted by any one of the several stock exchanges named in the
prospectus for listing of shares, the consequence is to render the entire allotment void and the
grant of permission by one or more of them is inconsequential. If, however, an appeal against the
decision of any stock exchange refusing permission for the shares or debentures to be dealt-in
thereat, has been preferred, such allotment shall not be void until the dismissal of the appeal.

If the prospectus mentions the names of more than one stock exchanges, then permission must
come from all of them. Each stock exchange must decide about the enlistment of shares of
the company within ten weeks from the date of closing of the subscription list. Where a stock
exchange fails to dispose of the application within ten weeks, then the same will be deemed to
have been rejected. The company may, under s.22 of Securities Contracts (Regulation) Act, 1956
appeal to the Central Government against the refusal: (i) within fifteen days from the date of

refusal; (ii) within fifteen days from the date of the expiry of ten weeks; whichever is earlier.
Where the allotment is void under s.73, the company has to repay the application money at once
to the applicants, and if it is not repaid within eight days after the company becomes liable to
repay, the company and every director of the company who is an officer in default shall be jointly

and severally liable to repay it with interest at the rate of 15% p.a.
Refund of Excess Money (Oversubscription). SEBI’s Guidelines, 2000 disallow retention of over-
subscription under any circumstances. Accordingly, where the permission has been granted by
the stock exchange(s), all moneys in excess of the application money on shares allotted must be
repaid forthwith without interest [s. 73(2A)]. If such money is not repaid within eight days, then
the company and every director who is an officer in default shall, on and from expiry of the 8th

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