Answer based on following passage.
Earn Limited, with an authorised capital of ₹10,00,000 divided into equity shares of ₹ 10 each, issued 50,000 equity shares at a premium of ₹3 per share payable as follows.
On application - ₹3 per share
On allotment - ₹5 per share (including Premium)
On first and final call- Balance amount.
Applications were received for 60,000 shares. The Directors allotted the shares to all applicants on pro-rata basis. All money received except the first and final call on 1,000 shares issued to Ravi.
Select the alternatives that were available to the directors to deal with the type of subscription which arose in the above case of Earn Limited in addition to the one used by them.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → To accept some application in full and accept some in Pro-Rata and reject some
Earn Limited faced over-subscription and chose a pro-rata allotment to all. The other two courses open to the directors are to accept some applications in full and reject the rest, or to combine full acceptance, pro-rata allotment and rejection – which is what Option (3) describes.
Option (1) To change/alter the prospectus to accept all applications — Incorrect. The company cannot allot more shares than it offered; the prospectus is not altered to absorb excess applications.
Option (2) To totally reject all applications — Incorrect. Rejecting every applicant would mean no issue at all, which is not a way of dealing with excess demand.
Option (4) To accept all share application outright — Incorrect. Only the 50,000 shares offered can be allotted.
NCERT (2026-27 edition): |