Question

Bhuvan Ltd. Issues 5,00,000 shares of Rs. 10 each for public subscription. Application along with money was received for 4,00,000 share. Can company allot these shares? Explain.

Answer 1

No company cannot allot these shares because as per Companies Act, 1956 a company must receive minimum `90%` of subscription within 120 days from the date of issue otherwise allotment can not be made.
In this case, the allotment will be valid only when at least application money for 4,50,000 shares is received i.e. `90%` But they have received only `80%` i.e. for 4,00,000 shares only, so allotment can not be made.