High Light India Ltd. invited applications for 30,000 shares of ₹100 each at a premium of ₹ 20 per share payable as follows :
| On Applications | ₹40 (including ₹10 premium) |
| On Allotment | ₹30 (including ₹10 premium) |
| On First Call | ₹30 |
| On Second and Final Call | ₹20 |
Applications were received for 40,000 shares and pro-rata allotment was made to the applicants for 35,000 shares. Excess application money was utilised towards allotment.
Rohan to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited immediately after allotment.
Aman who applied for 1,050 shares failed to pay first call and his shares were forfeited immediately after first call.
Second and final call was made. All the money due on second call has been received.
Of the shares forfeited 1,000 shares were reissued as fully paid-up for ₹80 per share, which include the whole of Aman's shares.
Answer the question on the basis of the information given.
Pro-rata allotment means _________.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Directors opt to make proportionate allotment to all applications.
When a share issue is over-subscribed, the directors may reject some applications, make a pro-rata (proportionate) allotment to all, or combine the two. Pro-rata means every applicant gets shares in the same proportion, and the excess application money is usually adjusted towards allotment.
Option (1) Directors fully accept some applications and totally reject others. — Incorrect. This is the first alternative, not pro-rata allotment.
Option (2) Directors fully accept all applications. — Incorrect. In over-subscription the company cannot allot more shares than it offered.
Option (4) Directors opt to make proportionate allotment to half applicants — Incorrect. Pro-rata allotment covers all applicants, not half of them.
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