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Where will excess money adjust if a lesser no of shares is allotted to the shareholder than applied by him? |
Adjusted to another shareholder A/c that don't pay money Adjusted in the bank account Adjusted in a newly opened account named 'temporary account' Adjusted in allotment money |
Adjusted in allotment money |
The correct answer is option 4- Adjusted in allotment money. In case lesser number of shares have to be allotted, than those applied for the excess application money must be adjusted towards the amount due on allotment. When the directors opt to make a proportionate allotment to all applicants (called ‘pro-rata’ allotment), the excess application money received is normally adjusted towards the amount due on allotment. In case, the excess application money received is more than the amount due on allotment of shares, such excess amount may either be refunded or credited to calls in advance. For example, in the event of applications for 20,000 shares being invited and those received are for 25,000 shares, it is decided to allot shares in the ratio of 4:5 to all applicants. It is a case of pro-rata allotment and the excess application money received on 5,000 shares would be adjusted towards the amount due on the allotment of 20,000 shares. |
