Q.What is meant by minimum subscription? Explain the provisions relating to allotment of shares and the issue of the share certificate.

A company cannot simply allot shares to whoever applies — the law first requires it to be sure enough money has genuinely come in, and only then moves to allotment and the share certificate.

Section 39 of the Companies Act, 2013 requires that no allotment of shares offered to the public can be made unless the amount stated in the prospectus as the minimum subscription has actually been received. Minimum subscription is the minimum amount which, in the Board's own opinion as stated in the prospectus, must be raised through the issue to meet the company's stated requirements, and SEBI's own regulations additionally fix a floor of ninety per cent of the issue as the minimum that must genuinely be subscribed. If this minimum is not received within the period stated in the prospectus, the company is barred from proceeding with any allotment at all, and every rupee of application money already collected must be refunded to the applicants — within fifteen days, under SEBI's regulations — failing which the company becomes liable to repay the money with interest (at fifteen per cent per annum), and any director knowingly party to the default becomes personally liable as well.

Once minimum subscription is secured, allotment is the act by which the company's Board (or an authorised allotment committee) appropriates a specific number of shares to a particular applicant, turning that applicant into a shareholder. A letter of allotment is sent to every successful applicant, and a letter of regret, together with a refund of the money paid, is sent to an applicant who is allotted no shares, or fewer than applied for. Within thirty days of any allotment, the company must file a return of allotment, in the prescribed Form PAS-3, with the Registrar of Companies, disclosing full particulars of the shares allotted and the allottees. …

A common error is stating the share-certificate issue period as 'two months from application' rather than from allotment — the clock starts at allotment. Students also sometimes forget that failing to receive minimum su …