Q.Zenith Fabrics Ltd., a public company, issued a prospectus inviting the public to subscribe for its shares. The prospectus stated that the company had already secured a large export order from a European buyer and projected very high profits on that basis. In reality, no such export order existed — the statement was inserted, and authorised for inclusion, by two of the company's directors to attract more applications. Mr. Kumar subscribed for 500 shares after reading this prospectus, relying on the export-order claim, and suffered a financial loss when the company's actual performance fell far short of what was projected.

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 …

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. …