Accountancy Part AAccounting for Shares

In case of over subscription, three alternatives are available to the…

In case of over subscription, three alternatives are available to the directors to deal with the situation. Find the odd alternative.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → They will not make any allotment and go for fresh issue.

When a company receives applications for more shares than it offered, the directors deal with the excess in one of three ways, and each of them still allots the shares on offer.

Option (1) They can accept some applications in full and totally reject the others. — One of the three alternatives. The rejected applicants get their application money back.
Option (2) They can make a pro-rata allotment to all. — One of the three alternatives. Every applicant gets shares in proportion to what he applied for.
Option (4) They can adopt a combination of the two alternatives ... — One of the three alternatives. This is the course most often followed in practice.

Refusing to allot at all and going for a fresh issue is not one of them: an over-subscribed issue has more than enough applicants, so there is no reason to start again.

NCERT (2026-27 edition):
Over Subscription – “… In such a condition, three alternatives are available to the directors to deal with the situation: (1) they can accept some applications in full and totally reject the others; (2) they can make a pro-rata allotment to all; and (3) they can adopt a combination of the above two alternatives which happens to be the most common course adopted in practice.”