Under-Subscription, Over-Subscription and Calls-in-Arrears/Advance

In practice, the number of shares actually applied for rarely matches the number of shares issued exactly.

Under-subscription

When applications received are fewer than the shares offered, the issue is said to be under-subscribed. Provided the amount received is not less than the 'minimum subscription' the company is required to secure — SEBI's ICDR Regulations require at least 90% of a public issue to be subscribed before the company can proceed — the company simply allots shares equal to the applications actually received, and every later entry (allotment, calls) is made only on that smaller number of shares. If minimum subscription is not reached, the company must refund all application money in full; it cannot go ahead with a partial allotment.

Over-subscription

When applications received exceed the shares offered, the company has three options, often used together for different groups of applicants:

1. Full rejection — refund the application money in full to some applicants and allot them nothing.
2. Full allotment — allot the full number of shares applied for to some applicants (typically a small, preferential category).
3. Pro-rata allotment — allot a smaller number of shares than applied for, in the same proportion, to a category of applicants; the excess application money on the shares they did not get is not refunded in cash but adjusted against the amount due on allotment (and, if a surplus still remains, against calls).

Pro-rata example, in words: if a company issues 10,000 shares and receives applications for 12,000 shares from one category of applicants, that category receives shares in the ratio 10,000 : 12,000, i.e. 5 shares for every 6 applied for. The extra money already paid on the 2,000 shares they did not get is not refunded — it is first adjusted against the allotment money due from them, and against calls if a surplus still remains after that.

Calls-in-Arrears

When a shareholder fails to pay the amount due on allotment or on a call by the due date, the unpaid amount is called Calls-in-Arrears. Under Table F of the Companies Act, 2013, a company may charge interest on calls-in-arrears at a rate not exceeding 10% per annum, from the due date until the date of actual payment, where the Articles of Association permit it.

Calls-in-Advance …