What is meant by "Minimum Subscription"?

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Minimum subscription, under Section 39 of the Companies Act, 2013, is the least amount of capital that a public company must actually raise from the public before it is permitted to allot any shares on that particular issue. The figure is stated in the prospectus itself. The purpose of this rule is to ensure that a company does not start operating on an inadequate or uncertain capital base — if barely any of the issue is subscribed, allotting shares regardless would leave the company under-capitalised and would mislead the few investors who did apply into believing the venture was fully backed. If the amount stated as the minimum subscription is not received within the period mentioned in the prospectus, the company cannot proceed with allotment at all, and it must refund every rupee of application money it ha …

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CBSE 2024Set ANNUAL2 marks
$Q. Write a short note on: Minimum Subscription$
›Reveal solutionSolution

Minimum subscription is the minimum amount of share capital that must be subscribed by the public before a company can allot shares. If it is not received within the prescribed period, the application money must be refunded.

Minimum subscription refers to the minimum amount which, in the estimate of the directors, must be raised by the issue of shares so that the company has enough funds to meet its basic requirements — such as the purchase of fixed assets, preliminary expenses and working capital. The amount of minimum subscription is stated in the prospectus. As per the Companies Act, a public company cannot proceed to allot shares unless the minimum subscription stated in the prospectus has been subscribed and the application money received; if it is not received within the specified time, the applica …

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CBSE 2023Set ANNUAL2 marks
$Q. Write a short note on: Minimum Subscription$
›Reveal solutionSolution
Minimum subscription is the least amount of share capital that must be subscribed by the public before a company can validly allot shares. It is stated in the prospectus; if it is not received, the application money must be returned and no allotment can take place.

Minimum Subscription

When a public company invites the public to buy its shares through a prospectus, it must state the minimum subscription — the minimum amount that, in the opinion of the directors, must be raised to meet the essential needs of the business (such as the purchase of necessary property, preliminary expenses and working capital). Its purpose is to ensure the company has enough funds to start business and to protect investors from putting money into an under-financed venture.

The amount of minimum subscription must be disclosed in the prospectus.

It must be received within the prescribed period (as per SEBI guidelines/the Companies Act) from the date of issue of the prospectus. …
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Q.What is meant by "Minimum Subscription"?

Concept understanding — Prospectus

Q.What is meant by "Minimum Subscription"?

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