Difference between Over Subscription and Under Subscription of Shares

Company issues shares to be purchased by the general public so that they can be owned by the public. There are two scenarios related to the issue of shares, which are:

1. Oversubscription of shares

2. Under Subscription of shares

Oversubscription is referred to as the situation where a company receives more applications from share buyers than the number of shares made available for the public.

Under Subscription is referred to as the situation where the number of shares applied by the public is less then the shares that are issued by the company.

Companies that have just started or lack a good reputation will experience under-subscription.

Below are some points of difference between oversubscription of shares and under subscription of shares.

Over Subscription of Shares

Under-subscription of shares

Definition

Oversubscription is referred to as the situation where a company receives more applications from share buyers than the number of shares made available for public

Under Subscription is referred to as the situation where the number of shares applied by the public is less then the shares that are issued by the company

Number of Applications received

The number of applications received is more than the shares issued

The number of applications received is less than the shares issued

Acceptance Rate

All the applications won’t be approved and the shares will be allocated on a pro-rata basis

Full allotment made i.e all the applications for the shares are accepted

Equality of Subscribed and Issued Capital

Issued capital and subscribed capital are equal in number

Issued capital is more than the subscribed capital

Pro-rata allotment

Pro-rata allotment is made in case of over subscription of shares

No pro-rata allotment in case of under subscription of shares

Money Refund

Money is refunded in case the application is rejected

There will be no need for refund

This article was all about the topic of Difference between Over Subscription and Under Subscription of Shares, which is an important topic for Commerce students. For more such interesting articles, stay tuned to BYJU’S.

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