Arrange in correct sequence-

(A) Share Allotment

(B) Share Application

(C) Share forfeiture

(D) Share Call

Choose the correct answer from the options given below:

(B), (A), (D), (C)

The correct answer is option 3- (B), (A), (D), (C).

The correct sequence of share capital transactions in a company is-

B) Share Application – Investors apply for shares and submit the application money. Prospective investors who wish to purchase shares in the company submit applications along with the application money. The application money is deposited into a scheduled bank as specified in the prospectus. The company must receive the minimum subscription amount within 120 days of issuing the prospectus. If the company does not receive the minimum subscription amount within this time period, it cannot proceed with the allotment of shares and must return the application money to investors within 130 days of issuing the prospectus.

A) Share Allotment – Company allots shares to applicants and calls for allotment money. If the company receives the minimum subscription amount, it may proceed with the allotment of shares after fulfilling certain legal formalities. The company sends letters of allotment to the investors who have been allocated shares and letters of regret to investors who have not been allocated shares. Once shares have been allotted, a valid contract is formed between the company and the investors, who are now shareholders of the company. After the allotment of shares, share application money is transferred to share capital A/c.

D) Share Call – The company may make one or more calls for the remaining unpaid amount. Calls play a vital role in making shares fully paid-up and for realising the full amount of shares from the shareholders. After allotment a company make calls. 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. Two points are important regarding the calls on shares. First, the amount on any call should not exceed 25% of the face value of shares. Second, there must be an interval of at least one month between the making of two calls unless otherwise provided by the articles of association of the company.

C) Share Forfeiture – If a shareholder fails to pay the call money, their shares may be forfeited. 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.