State and explain the six steps required to raise funds from the public i.e., capital subscription by the company
CBSE Class 11
CBSE Class 11 Business Studies
2016-08-01 11:16:23 UTC
SEBI approval : The first step is to take the approval from the regulatory authority i.e., SEBI. The company has to follow all the rules and guidelines that are issued by the SEBI.
Filing of prospectus : Prospectus is a statement containing all the relevant information regarding the state of affairs of the company and showing the future prospects of the company. The purpose of prospectus is to induce the public to purchase the shares and debentures. So, the next step is to file the copy of the prospectus with the registrar of firms.
Appointment of bankers, brokers and
underwriters : The banker is appointed to collect the money coming from the applications. A broker is appointed to induce the public, by creating an image in the public’s mind for the purchase of the shares and debentures. An underwriter is appointed to ensure that the issue is subscribed fully. The company appoints the bankers, brokers and underwriters and also pays charges for their services.
Minimum subscription : Minimum subscription
means the minimum amount which should be subscribed by the public. According to the guidelines of SEBI, minimum subscription is 90% of the entire issue.
Listing of shares : Now the company will make an application to at least one stock exchange for the purchase of the shares.
Allotment of shares: Allotment letters are issued to the successful applicants.