Over Subscription means when applications received for shares of a company are more than the number of shares offered to the public for subscription. Identify correct statements regarding over subscription.
(A) This happens in respect of the share issue of well-managed and financially strong companies.
(B) The problem of over subscription is resolved with the forfeiture of shares.
(C) In such condition, three alternatives are available to the directors to deal with the situation.
(D) The problem of over subscription is usually resolved with the allotment of shares.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (C) and (D) only
Over subscription is a problem of too many applications, so it is settled when the shares are allotted, not later.
(A) This happens in respect of the share issue of well-managed and financially strong companies. Correct. Investors trust such companies, so their issues attract more applications than the shares offered.
(B) The problem of over subscription is resolved with the forfeiture of shares. Incorrect. Forfeiture is the remedy for non-payment of calls by a shareholder; it has nothing to do with surplus applications.
(C) In such condition, three alternatives are available to the directors to deal with the situation. Correct. The directors may accept some applications in full and reject the rest, allot to all on a pro-rata basis, or combine the two.
(D) The problem of over subscription is usually resolved with the allotment of shares. Correct. The excess application money is refunded or adjusted against the amount due on allotment.
NCERT (2026-27 edition): |