The correct answer is Option (3) → B, A, D, C
The steps follow the life of a share issue, each one depending on the one before it.
B. Issue of prospectus — comes first, because the prospectus is the company’s invitation to the public to subscribe.
A. Receipt of applications — investors apply, with the application money, on the strength of the prospectus.
D. Allotment of shares — once the minimum subscription has been received, the company allots the shares and the applicants become shareholders.
C. Forfeiture of shares — comes last. Shares can be forfeited only after they have been allotted, when a shareholder fails to pay the allotment or call money due on them.
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. • 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.” 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.” |
