Arrange following steps in sequence with regard to the procedure of s…

Arrange following steps in sequence with regard to the procedure of share issue, forfeiture and reissue.

A. Receipt of Applications

B. Allotment of shares

C. Issue of prospectus

D. Forfeiture of shares

E. Reissue of shares

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → C, A, B, D, E

Shares are first offered, then applied for and allotted; forfeiture and reissue can only follow allotment and default.

(C) Issue of prospectus — the company invites the public to subscribe.
(A) Receipt of Applications — investors apply with the application money.
(B) Allotment of shares — made once minimum subscription is received.
(D) Forfeiture of shares — when an allottee fails to pay allotment or call money.
(E) Reissue of shares — only shares already forfeited can be reissued.

NCERT (2026-27 edition):
Issue of Shares – “… • 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.”

NCERT (2026-27 edition):
Allotment of Shares – “… If minimum subscription has been received, the company may proceed for the allotment of shares after fulfilling certain other legal formalities.”

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 – “… Once all the forfeited shares have been reissued, any credit balance on Share forfeiture account is transferred to Capital Reserve representing profit on forfeiture of shares.”