Securities to be dealt with in stock exchanges.[Section 40] :
(1) Companies to obtain permission for the securities from the recognized stock exchange: Every company making public offer shall make an application to one or more recognised stock exchange or exchanges and obtain permission for the securities to be dealt with in such stock exchange or exchanges.
(2) Prospectus to state the name of the stock exchange: Where a prospectus states that an application according to the above provision has been made, such prospectus shall also state the name or names of the stock exchange in which the securities shall be dealt with.
(3) Monies received for subscription to be kept in separate bank account: All monies received on application from the public for subscription to the securities shall be kept in a separate bank account in a scheduled bank and shall be utilised for the following purposes only—
(a) for adjustment against allotment of securities where the securities have been permitted to be dealt with in the stock exchange or stock exchanges specified in the prospectus; or
(b) for the repayment of monies within the time specified by the Securities and Exchange Board, received from applicants in pursuance of the prospectus, where the company is unable to allot securities.
(4) Act not in compliance with the requirements of this section: Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of this section, shall be void.
(5) Punishment: If a default is made in complying with the provisions of this section, then both the company and every officer of the company shall be punishable with a fine / imprisonment or with both.
(i) Company shall be punishable with not less than five lakh rupees which may extend to fifty lakh rupees, and
(ii) Every officer of the company who is in default shall be punishable with imprisonment for a term extending up to one year or with fine not less than fifty thousand rupees which may extend to three lakh rupees, or with both.
(6) Payment of commission for subscription: A company may pay commission to any person in connection with the subscription to its securities subject to the prescribed conditions
The Companies (Prospectus and Allotment of Securities) Rules, 2014 prescribes the conditions for the payment of commission. Condition for the payment of commission: A company may pay commission to any person in connection with the subscription or procurement of subscription to its securities, whether absolute or conditional, subject to the following conditions, namely:
(a) Authorized by the Articles: The payment of such commission shall be authorized in the company’s articles of association;
(b) Paid out of the proceeds of the issue/profit: The commission may be paid out of proceeds of the issue or the profit of the company or both;
(c) Rate of Commssion: The rate of commission paid or agreed to be paid shall not exceed, in case of shares, 5% of the price at which the shares are issued or a rate authorised by the articles, whichever is less, and in case of debentures, shall not exceed 2.5% of the
price at which the debentures are issued, or as specified in the company’s articles, whichever is less;
(d) Disclosure of the particulars: The prospectus of the company shall disclose –
(i) the name of the underwriters
(ii) the rate and amount of the commission payable to the underwriter; and
(iii) the number of securities which is to be underwritten or subscribed by the underwriter absolutely or conditionally.
(e) No payment of commission: There shall not be paid commission to any underwriter on securities which are not offered to the public for subscription.
(f) Copy of the contract to be delivered to the Registrar: A copy of the contract for the payment of commission is delivered to the Registrar at the time of delivery of the prospectus for registration.