Answer based on following passage.
Earn Limited, with an authorised capital of 10,00,000 is 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 I 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 arise in 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.
In such a case of oversubscription, three alternatives are available to the directors to deal with the situation:
(i) they can accept some applications in full and totally reject the others;
(ii) they can make a pro-rata allotment to all; and
(iii) they can adopt a combination of the above two alternatives which happens to be the most common course adopted in practice.