Question

Explain the term 'Minimum Subscription'.

Answer 1

When shares are issued to the general public, the minimum amount that must be subscribed by the public so that the company can allot shares to the applicants is termed ‘minimum subscription’. As per the Companies Act of 1956, the minimum subscription of shares cannot be less than 90 per cent of the issued amount. If the minimum subscription is not received, the company cannot allot shares to its applicants, and it shall immediately refund the entire application amount received from the applicants.