The act prescribes several (1) Statutory (2) General conditions related to allotment of shares by a company as follows:
(1) Registration of Prospectus: Copy of prospectus should be filed with ROC or copy of statement in lieu of prospectus if capital was raised privately.
(2) Application Money: Minimum of 5% of the face value of shares should e taken by company as application money. i.e. money payable with application of shares.
(3) Minimum subscription: Allotment of shares cannot begin if minimum subscription of 90% of issued capital is not collected. If not, company will have to refund the entire application money collected.
(4) Deposit of Application money: The application money remains with the specially opened account with a scheduled bank in ‘Share Application Money A/c” and cannot be withdrawn by company.
(5) Oversubscription: SEBI nominee be appointed to assist in allotment when there is oversubscription to decide on criteria and refunding.
(6) Permission to deal on Stock Exchange: Company offering shares to public by prospectus should make application to 1 or more recognized stock exchange for listing.
(7) Beginning the allotment procedure: Opening of subscription list can start after 5 days of opening the issue (in case of filing of prospectus) and within 3 days (in case of filing statement in lieu of prospectus). This enables the member of public to go through the prospectus thoroughly & decide.
(8) Closing of subscription list: Though not clear - cut provisions are there about closing the list, SEBI guidelines state that issue be open for minimum 3 and maximum 7 working days. In case of Right issue, the subscription list be open for not more than 60 (sixty) days.
