The amount stated in the prospectus as minimum subscription must have been subscribed for within 120 days of the issue of prospectus [Sec. 69 (2)]. As per Schedule II of the Companies Act and the SEBI Guidelines, the minimum subscription is 90% of the entire issue. But SEBI Guidelines require this amount to be raised within 60 days of the closure of the issue which is at variance with the provisions of the Companies Act [Sec. 69 (5)] stipulating 120 days from the issue of the prospectus.
3. Application money:
A sum of at least 5% of the nominal value of shares must have been received in cash by the company as application money. [Sec. 69 (3)] It has been held in a number of cases that though any means of remittance may be used but all remittances must be cleared and actual cash received by the company before proceeding with the allotment.
4. Money to be deposited in a scheduled bank:
All money 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 (i.e., by filing a statement in lieu of prospectus) until the entire amount payable on applications for shares in respect of minimum subscription has been received by the company.
5. Statement in lieu of prospectus:
In case a company is having share capital has not issued prospectus, it cannot proceed with the allotment unless at least three days before the allotment a statement in lieu of prospectus has been filed by it with the Registrar.
6. Opening of the subscription list:
No allotment shall be made until the beginning of the 5th day after that on which the prospectus is so issued, or such later time as may be specified in the prospectus.
Where, after the prospectus is first issued, a public notice is given by some person responsible under Section 62 for the issue of prospectus seeking to exclude, limit or diminish his responsibility, no allotment must be made before the beginning of the fifth day after that on which such public notice was first given. The beginning of the fifth day in each of the above case has been referred in the Act as “the time of the opening of the subscription list.” [Sec. 72 (I)]
Thus, a company cannot allot shares immediately after the issue of the prospectus. The object of this provision is to give sufficient time to the public to digest the contents of the prospectus and obtain independent advice, if possible, before applying for shares.
The Companies Act is silent regarding closing of the subscription list. This means that a company can start allotment of shares soon after opening of the subscription list and at the same time keep the subscription list open for the new applicants.
However, according to stock exchange regulations, the subscription list must be kept open for at least three days as regards listed securities. The prospectus usually mentions the time of closing of subscription lists. The subscription list should not be kept open for a period of more than 10 days in case the issue is underwritten and 21 days in all other cases.
7. Shares and debentures to be dealt in a stock exchange (Sec. 73):
Listing of all public issues with any recognized stock exchange(s) is compulsory. Section 73 provides that 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 of such shares or debentures to be dealt in on the stock exchange(s).
The prospectus issued by the company has to state the name of the stock exchange(s) where such application for listing is made. If the permission from such stock exchange or each of such exchanges (in case application has been made to more than one stock exchange) has not been granted before the expiry of 10 weeks from the date of the closing of the subscription list, the company cannot make any allotment of share. In case an appeal to the Central Government/Securities Appellate Tribunal against refusal by the stock exchange is filed, till the time approval for listing is finally obtained.
8. Initial offer of securities in dematerialized form (Sec. 68B):
Every listed public company, making initial public offer of any security for a sum of Rs. 10 crores or more, shall issue the same only in dematerialized form by complying with the requisite provisions of the Depositories Act, 1996 and the regulations made there under.