Explain the process of capital subscription.
Explain the process of capital subscription.
The following steps are required for raising funds from the public:
1. SEBI Approval:
• SEBI (Securities and Exchange Board of India), which is the regulatory authority in our country, has issued guidelines for the disclosure of information and investor protection.
• A public company inviting funds from the general public must make adequate disclosure of all relevant information and must not conceal any material information from the potential investors.
2. Filing of Prospectus:
• A copy of the prospectus or statement in lieu of prospectus is filed with the Registrar of Companies.
• A prospectus is ‘any document described or issued as a prospectus including any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any securities of, a body corporate’.
3. Appointment of Bankers, Brokers, Underwriters:
• Raising funds from the public is a stupendous task. The application money is to be received by the bankers of the company.
• The brokers try to sell the shares by distributing the forms and encouraging the public to apply for the shares. Underwriters undertake purchase of the shares if these are not subscribed by the public.
4. Minimum Subscription: In order to prevent companies from commencing business with inadequate resources, it has been provided that the company must receive applications for a certain minimum number of shares before going ahead with the allotment of shares. According to the Companies Act, this is called the ‘minimum subscription’.
• Applications received for the shares are for an amount less than 90 per cent of the issue size, the allotment cannot be made and the application money received must be returned to the applicants.
5. Application to Stock Exchange:
• An application is made to at least one stock exchange for permission to deal in its shares or debentures.
• If such permission is not granted before the expiry of ten weeks from the date of closure of subscription list, the allotment shall become void and all money received from the applicants will have to be returned to them within 8 days 6. Allotment of Shares:
• Till the time shares are allotted, application money received should remain in a separate bank account and must not be used by the company.
• In case the number of shares allotted is less than the number applied for, or where no shares are allotted to the applicant, the excess application money, if any, is to be returned to applicants or adjusted towards allotment money due from them.
• Allotment letters are issued to the successful allottees. ‘Return of allotment’, signed by a director or secretary is filed with the Registrar of Companies within 30 days of allotment
The following steps are required for raising funds from the public:
1. SEBI Approval:
• SEBI (Securities and Exchange Board of India), which is the regulatory authority in our country, has issued guidelines for the disclosure of information and investor protection.
• A public company inviting funds from the general public must make adequate disclosure of all relevant information and must not conceal any material information from the potential investors.
2. Filing of Prospectus:
• A copy of the prospectus or statement in lieu of prospectus is filed with the Registrar of Companies.
• A prospectus is ‘any document described or issued as a prospectus including any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any securities of, a body corporate’.
3. Appointment of Bankers, Brokers, Underwriters:
• Raising funds from the public is a stupendous task. The application money is to be received by the bankers of the company.
• The brokers try to sell the shares by distributing the forms and encouraging the public to apply for the shares. Underwriters undertake purchase of the shares if these are not subscribed by the public.
4. Minimum Subscription: In order to prevent companies from commencing business with inadequate resources, it has been provided that the company must receive applications for a certain minimum number of shares before going ahead with the allotment of shares. According to the Companies Act, this is called the ‘minimum subscription’.
• Applications received for the shares are for an amount less than 90 per cent of the issue size, the allotment cannot be made and the application money received must be returned to the applicants.
5. Application to Stock Exchange:
• An application is made to at least one stock exchange for permission to deal in its shares or debentures.
• If such permission is not granted before the expiry of ten weeks from the date of closure of subscription list, the allotment shall become void and all money received from the applicants will have to be returned to them within 8 days 6. Allotment of Shares:
• Till the time shares are allotted, application money received should remain in a separate bank account and must not be used by the company.
• In case the number of shares allotted is less than the number applied for, or where no shares are allotted to the applicant, the excess application money, if any, is to be returned to applicants or adjusted towards allotment money due from them.
• Allotment letters are issued to the successful allottees. ‘Return of allotment’, signed by a director or secretary is filed with the Registrar of Companies within 30 days of allotment
