Which of the following is incorrect about the minimum subscription?
Minimum subscription is the minimum amount that, in the opinion of directors, must be raised to meet the needs of business operations of the company relating to:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Personal needs of shareholders
Minimum subscription is the least amount the directors think must be raised for the company’s own business needs: property to be bought, preliminary expenses and issue commission, repayment of money borrowed for these, working capital and any other expenditure of the business. The personal needs of a shareholder are not a need of the company at all, so they are the odd one out.
Option (1) Preliminary expenses payable by the company and any commission payable in connection with the issue of shares — A need of the company. These are costs of forming the company and issuing its shares.
Option (2) Working capital — A need of the company. Money is needed to run the business from day to day.
Option (4) Any other expenditure required for the usual conduct of business operations — A need of the company. It covers the rest of the business’s regular spending.
NCERT (2026-27 edition):
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