There are instances when applications for more shares of a company are received than the number offered to the public for subscription. In such a condition, what are the alternatives available to the directors to deal with the situation?
(A) They can accept some applications in full and totally reject the others.
(B) They can make a pro-rata allotment to all.
(C) They can adopt a combination-accept some applications in full, pro-rata allotment to some and totally reject the remaining.
(D) They can totally reject all applications and come up with fresh issue.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B) and (C) only
An issue is over-subscribed when applications come in for more shares than are offered. The directors then have to decide who gets the shares on offer, and they have three alternatives.
(A) They can accept some applications in full and totally reject the others. Correct. Accepted applicants get every share they asked for; the application money of the rejected ones is refunded in full.
(B) They can make a pro-rata allotment to all. Correct. Every applicant gets shares in proportion to the number applied for, and the excess application money is adjusted towards allotment or refunded.
(C) They can adopt a combination-accept some applications in full, pro-rata allotment to some and totally reject the remaining. Correct. This mix of the first two is the course most commonly followed in practice.
(D) They can totally reject all applications and come up with fresh issue. Incorrect. Over-subscription means the issue has more than enough applications; the problem is solved through allotment, not by cancelling the issue and starting again.
NCERT (2026-27 edition): |