Arrange in correct sequence with respect to the issue of shares by company.

A. Allotment of shares
B. Forfeiture of shares
C. Application of shares received by the company
D. Reissue of shares
E. Transfer to Capital Reserve

Choose the correct answer from the options given below:

C, A, B, D, E

The correct answer is Option (2) - C, A, B, D, E.

C. Application of shares received by the company: This is the initial step where the company receives applications from individuals interested in buying its shares. When prospectus is issued to the public, prospective investors intending to subscribe the share capital of the company would make an application along with the application money and deposit the same with a scheduled bank as specified in the prospectus. The company has to get minimum subscription within 120 days from the date of the issue of the prospectus. If the company fails to receive the same within the said period, the company cannot proceed for the allotment of shares and application money should be returned within 130 days of the date of issue of prospectus.

A. Allotment of shares: After receiving applications, the company decides to whom it will allot the shares. f minimum subscription has been received, the company may proceed for the allotment of shares after fulfilling certain other legal formalities. Letters of allotment are sent to those whom the shares have been alloted, and letters of regret to those to whom no allotment has been made. When allotment is made, it results in a valid contract between the company and the applicants who now became the shareholders of the company.

B. Forfeiture of shares: If the allottee fails to pay the allotment money or the call money, the company may forfeit the shares. It may happen that some shareholders fail to pay one or more instalments, viz. allotment money and/or call money. In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles. These provisions are usually based on Table F which authorise the directors to forefeit the shares for non-payment of calls made. For this purpose, they have to strictly follow the procedure laid down in this regard.

D. Reissue of shares: Forfeited shares can be reissued to new shareholders. The directors can either cancel or re-issue the forefeited shares. In most cases, they reissue such shares which may be at par, at premium or at a discount. Forfeited shares may be reissued as fully paid at a par, premium, discount. In this context, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue, and that the discount allowed on reissue of forfeited shares should be debited to the ‘Forfeited Share Account’.

E. Transfer to Capital Reserve: . The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.