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Minimum subscription

As per guidelines of the securities exchange board of India (SEBI), a company must receive a minimum of 90% subscription against the entire issue (including development on underwriters in case of underwritten issue). Before making any allotment of shares or debentures to the public. If the company does not receive the minimum subscription, the entire subscription shall be refunded to the applicants within 42 days from the date of closure of issue.

1. On receipt of the application money

    Bank account

        To shares application account




(with the actual amount received)

2. On allotment of share

    Share allotment account

    Share application account

        To share capital account





(with the amount due on allotment)

(with the application amount received on allotted shares)

(with the amount due on allotment and application)

3. On receipt of allotment money

    Bank account

To share allotment account




(with the amount actually received on allotment)

4. On a call being made

    Share call account

        To share capital account





(with the amount due on the call)

5. On receipt of call money

    Bank account

To share call account




(with the due amount actually received on call)


Over-Subscription And Pro-Rata Allotment

Over subscription is the application money received for more than the number of shares offered to the public by a company. When the shares are oversubscribed, the company cannot satisfy all the applications. The company may reject some applicants in full, i.e., no shares are allotted to some applicants and application money is refunded. ‘Pro-rata allotment’ means allotment in proportion of shares applied for.

Under pro-rata allotment, the excess application money received is adjusted against the amount due n allotment or calls. Surplus money after making adjustment against future calls is returned to the applicants.

There is no separate journal entry for forfeiture of shares when there is a pro-rata allotment. But it requires to calculate the net amount due on allotment or any other call, and also the total amount forfeited.

Forfeiture And Re-Issue

The term ‘forfeit’ actually means taking away of property on breach of a condition. It is very common that one or more shareholders fail to pay their allotment and/ or calls on the due dates. Failure to pay call money results in forfeiture of shares. Forfeiture of shares is the action taken by a company to cancel the shares. The directors are usually empowered by the Article of Association to forfeit those shares by serving proper notice. The power of forfeiture must be exercised bonafidein the interests of the company.


The articles of a company usually authorise the directors to forfeit shares of a member on account of non-payment of a call or interest thereon after serving him a prior notice.

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