## Allotment of Securities by Company [Sections 38, 39 and 40(3)]
Allotment is the appropriation, out of previously unappropriated capital (Authorised – Issued capital) of the company, that constitutes acceptance of an applicant's offer.
### Pre-requisites for a valid allotment [Section 39]
An allotment to the public cannot be made unless both of the following are satisfied:
#### (1) Minimum Subscription
The amount of minimum subscription stated in the prospectus must have been:
- Subscribed by the public, and
- Received as application money by cheque or other instrument.
> Minimum subscription is not applicable in case of an Offer for Sale (OFS).
#### (2) Application Money
At least 5% of the nominal (face) value of the security, or such percentage/amount as SEBI specifies, must be payable on application.
> For an OFS, the full issue price must be payable on application.
### Consequence of failure to achieve minimum subscription
If minimum subscription is not received and application money not received within 30 days of issue of the prospectus (or the period SEBI specifies):
- Application money must be refunded within 15 days of closure of issue, to the same bank account from which the money was received.
- On failure to refund within time, directors and officers in default are jointly and severally liable to refund with interest @ 15% p.a.
### Quick summary table
| Requirement | Public Issue | Offer for Sale (OFS) |
|---|---|---|
| Minimum subscription | Required | Not required |
| Application money | ≥ 5% of face value (or SEBI rate) | Full issue price |
| Refund window if minimum not met | Within 15 days of closure of issue | — |
| Interest on delayed refund | 15% p.a. on directors/officers in default | — |