The correct answer is Option (3) → (B), (A), (D), (C), (E)
(B) Issue of prospectus — the company first invites the public to buy its shares.
(A) Application received — investors then apply with the application money.
(D) Allotment of Shares — once minimum subscription is received, shares are allotted to the applicants.
(C) Forfeiture of shares — a shareholder who fails to pay the allotment or call money can have his shares forfeited, which can happen only after allotment and calls.
(E) Reissue of forfeited shares — only shares that have already been forfeited can be reissued, so this comes last.
NCERT (2026-27 edition):
Issue of Shares – “… The important steps in the procedure of share issue are : • Issue of Prospectus: The company first issues the prospectus to the public. Prospectus is an invitation to the public that a new company has come into existence and it needs funds for doing business. It contains complete information about the company and the manner in which the money is to be collected from the prospective investors.” NCERT (2026-27 edition):
Issue of Shares – “… • Receipt of Applications: 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.” NCERT (2026-27 edition):
Issue of Shares – “… Allotment of Shares: If 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.” 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.” NCERT (2026-27 edition):
Reissue of Forfeited Shares – “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.” |
