Section 39 of CA 2013 : Section 39: Allotment Of Securities By Company

Explanation using Example

Imagine XYZ Tech Ltd. is a company that decides to issue new shares to the public. They publish a prospectus stating that the minimum subscription they need to raise from the public is $500,000. According to Section 39(1) of the Companies Act, 2013, XYZ Tech Ltd. cannot proceed to allot the shares until they have received at least this minimum amount in applications, and the payments are made via cheque or another approved financial instrument.

The prospectus also states that each share costs $10 and, as per Section 39(2), applicants must pay a minimum of 5% per share on application, which amounts to $0.50 per share.

After the issue date, suppose only $400,000 has been subscribed within 30 days. Following Section 39(3), XYZ Tech Ltd. is required to refund all the application money to the applicants since they did not meet the minimum subscription amount within the specified time frame.

If XYZ Tech Ltd. had received the minimum subscription and proceeded with the share allotment, they would need to file a return of allotment with the Registrar, as per Section 39(4). Failing to do so would lead to penalties under Section 39(5), which could be substantial if the default continues over an extended period.