Write short notes on the following:
- Minimum subscription.
- Statement in lieu of prospectus.
- Preliminary contracts.
- Procedure of allotment.
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Minimum subscription : Shares of a private company can easily be allotted without receiving minimum subscription. However, prior to issuing the shares to the public at large, a public company must be in receipt of minimum subscriptions. According to SEBI guidelines, minimum subscription has been fixed at 90% of the entire issue. No allotment shall be made of any share capital of a company offered to the public for subscription unless the amount stated in the prospectus as the minimum amount has been subscribed, according to section 69(1) of the Companies Act.
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Statement in lieu of prospectus : When the company promoters do not want to approach the public for the purchase of the shares, and the promoters are in a position to get the subscriptions from the shares and debentures from a limited circle of their friends, relatives and connections, then in that case, no prospectus needs to be filed and issued. But the applicants who want to purchase the shares have to file “statement in lieu of prospectus” before the allotment of shares. This statement must be duly signed by all the persons named therein as directors. The statement is only required for filing and contains the similar information as required in the prospectus.
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Preliminary contracts : These are the contracts which are signed by the promoters with the third parties before the company’s incorporation.
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Procedure of allotment : It is the process of accepting the applications of the applicants for the purchase of the shares. The applicants get the allotment letters in return. After the process of allotment the applicants become the shareholders of the company. These applicants become a part of the company and can also participate in the management decisions.