According to subsection (6) of section 42, the company shall allot its securities within 60 days from the date of receipt of application money , if it does not allot within 60 days then the application money shall be repaid within 15 days after the expiry of 60 days and if company does not pay money after the aforesaid period, the company is liable to repay the money with interest @ 12% per annum from the expiry of 60 days the monies received shall be kept in separate bank account with a scheduled bank.
There are three methods of Allotments of Share:
- PRIVATE PLACEMENT: Private placement means any offer of securities or invitation to subscribe securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of private placement offer letter and which satisfies the conditions as specified in Section 42 of the Companies Act, 2013. The private placement of securities is governed by Section 42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
- RIGHTS ISSUE OF SHARES: The Right issue of shares means issue when new shares are offered to the existing shareholders in proportion to their current shareholding. The Right Issue of shares is governed by Section 62 of the Companies Act, 2013.
- PREFERENTIAL ALLOTMENT OF SHARES: The Preferential allotment of shares is governed by Section 62(1(C) of the Companies Act, 2013 read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014.The expression ‘Preferential Offer’ means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities.
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