Question

High Order Thinking Skills

Company A goes for public issue of 10,000 shares @ Rs 10 each. Application were received for only 5,000 shares. Can the company proceed with the process of issuing shares?

Answer 1

In the case of Company A
Issued shares to public — 10,000 Shares @ 10 each.
Applied share public by — 5,000 Shares @ 10 each.
Company receives only 50% of the subscription within 120 days from the date of the issue, then it is called as Minimum subscription.
As per the SEBI guidelines, if the company does not receive 90% of the issue amount from the public subscription including development from underwriters within 120 days from the date of the issue, the amount of subscription received is required to be refunded to the applications. In case of disputed development also, subscription is required to be refunded if 90% of the issued amount plus accepted. Development from underwriters if any is not received within 120 days of the issue of prospectus, all the money received from the applicants for shares is required to be repaid forthwith without interest and if any such money is not so repaid in the next 10 days (after the expiry of 120 days), the directors of the company are jointly and severally liable to repay that money, with interest from the expiry of the 130 days.
The company should refund the amount within 10 weeks of the closing of the subscription list and pay interest, if refunds are delayed by more than 8 days after this period.