Identify the correct sequence of steps in the process of Issue of Sha…

Identify the correct sequence of steps in the process of Issue of Shares:

A. Making allotment of shares

B. Issue of Prospectus

C. Forfeiture of shares

D. Receiving applications for shares

E. Making calls

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → B - D - A - E - C

The steps follow the order in which a share issue actually takes place:

B. Issue of Prospectus — first. The prospectus invites the public to subscribe.
D. Receiving applications for shares — second. Investors apply on the basis of the prospectus, with the application money.
A. Making allotment of shares — third. Once the minimum subscription is received, shares are allotted.
E. Making calls — fourth. The balance of the share price is called up from the allottees.
C. Forfeiture of shares — last. Only a shareholder who fails to pay an allotment or call money can have his shares forfeited, so forfeiture comes after the calls.

NCERT (2026-27 edition):
Issue of Shares

Extract from the NCERT textbook

NCERT (2026-27 edition):
Accounting Treatment – “… On Calls : Calls play a vital role in making shares fully paid-up and for realising the full amount of shares from the shareholders. In the event of shares not being fully called up till the completion of allotment, the directors have the authority to ask for the remaining amount on shares as and when they decide about the same. It is also possible that the timing of the payment of calls by the shareholders is determined at the time of share issue itself and given in the prospectus.”

NCERT (2026-27 edition):
Forfeiture of 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.”