If the public applies for fewer shares than the shares offered to the public for subscription by the company, then the situation created is called:
Answer & explanation
Correct answer: option 1
Under subscription is a situation where number of shares applied for is less
than the number for which applications have been invited for subscription. For
example, a comapny offered 2 lakh shares for subscription to the public but the
applications were received for 1,90,000 shares, only. In such a situation, the
allotment will be confirmed to 1,90,000 shares and entries shall be made
accordingly. However, as stated earlier, it must be ensured that the company
has received the minimum subscriptions and the company will have to refund
the entire subscription amount received.