A Public Company has to next start accumulating the necessary capital to start its business activity. For this the promoters issue the prospectus to the public inviting their subscriptions towards capital.
After receiving the applications for shares towards the share capital, a public company has to allot shares to the public. The company cannot make allotment of shares unless the following conditions are fulfilled.
Conditions of Allotment:
1. Minimum subscription as stated in the prospectus is to be received.
2. The application money not less than 5% of the nominal value of shares has to be received.
3. The application money is to be deposited in a Scheduled Bank.
4. If prospectus is not issued, statement in lieu of prospectus is made and delivered to Registrar at least 3 days before the first allotment.
5. If minimum subscription is not received within 120 days of the date of issue of prospectus the application money is to be refunded within next ten days.
6. Listing the shares in a stock exchange if stated in prospectus and Articles of Association.
It is the minimum amount of money to be collected by the company from the public by way of subscription towards the share capital.
The amount of minimum subscription is normally specified in the Articles or Prospectus of the company.
The minimum subscription is to be received so that the company can meet the following important expenses.
Towards purchase/lease of property for company’s use.
Towards preliminary expenses including payment of the underwriters commission if any.
Towards working capital requirements.
Towards repayment of loans already take n for the above purpose.
Towards any other expenses giving details of such expenses.
The directors or promoters have to then submit a declaration that the minimum subscription has been received and that the other requirements have been met, to the Registrar of Companies.