In case of over subscription, the directors may (A). Accept some appl…

In case of over subscription, the directors may

(A). Accept some applications in full and reject excessive applications

(B). They can make pro-rata allotment to all

(C). They can adopt a combination of the above two alternatives

(D). They can make preferential allotment to some applicants

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Only (A), (B) and (C)

Over subscription means applications are received for more shares than the company has offered. The directors cannot allot more shares than offered, so they have three ways to deal with it.

(A). Accept some applications in full and reject excessive applications Correct. Some applicants get all the shares they asked for and the other applications are rejected, with their money refunded.

(B). They can make pro-rata allotment to all Correct. Every applicant gets shares in proportion to the shares applied for, and the excess application money is adjusted towards allotment or refunded.

(C). They can adopt a combination of the above two alternatives Correct. Some applications are rejected and the rest get a pro-rata allotment; this is the most common course in practice.

(D). They can make preferential allotment to some applicants Incorrect. Preferential allotment is a separate way of issuing shares to a chosen group; it is not one of the three alternatives for dealing with over subscription.

NCERT (2026-27 edition):
Over Subscription – “… In such a condition, three alternatives are available to the directors to deal with the situation: (1) they can accept some applications in full and totally reject the others; (2) they can make a pro-rata allotment to all; and (3) they can adopt a combination of the above two alternatives which happens to be the most common course adopted in practice.”