Question

Essay Type Question.
Explain in brief capital subscription stage?

Answer 1

After getting the certificate of incorporation the private companies get formulated and can commence their business activities but a public limited company has to perform the third stage that is the capital subscription stage:-

The steps involved in the stage of commencement of business are:-

1. SEBI Approval:- SEBI (Security Exchange Board of India) is a regulatory body, which controls the capital market of India to protect the interest of investors. The Public Ltd. companies must submit all the relevant information with the SEBI before issuing their securities in the capital market.

2. Prospectus or a Statement in Lieu of Prospectus:- A public company has to prepare another important document called a prospectus. It is a circular or invitation issued to invite the general public for subscribing to the shares of the company. This document has to be deposited with the registrar.

3. Appointment of Bankers, Brokers, and Underwriters:- To receive and deposit the application money banker is appointed. To sell the shares brokers are appointed. They encourage the public to buy the shares and charge a commission for the same. If the company is not sure of selling the whole lot of shares it may appoint underwriters. They underwrite the shares and charge commission for the same.

4. Minimum Subscription:- To make sure that the company does not have a shortage of funds, it is made compulsory that company must receive an application for some minimum number of shares. A public limited company cannot make an allotment of shares unless a minimum subscription is received.

5. Application to stock exchange:- A firm must get itself listed in stock exchange before selling its securities to the general public. The company may apply in any of the recognized stock exchanges to get permission.

6. Allotment of Shares:- After getting the name listed, the company prepares a return of allotment. Return of allotment is a statement giving details about the names and addresses of all the shareholders.