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Procedure for Issue of Shares

A Public Company issues prospectus inviting the general public to subscribe for its shares. Based on the prospectus, those who are interested in the subscription of shares can apply for it along with the application money.


It must be noted that as per Sec. 69(3) of the Companies Act, 1956, the application money must be at least 5% of the face value of the shares.

As per the SEBI guidelines, the issuing Company must ensure that the application money is at least 25% of the issue price of the share.

The Company, as per SEBI guidelines, can allot the shares to the applicants only after ensuring that a minimum of 90% of the shares offered have been subscribed by the public.

If the Company does not receive the minimum subscription, the entire application money must be refunded to the applicants within 15 days from the date of closure of issue.

In case of delay in refunding the money, the Company is liable to pay interest ranging from 4% p.a. to 15% p.a.

On meeting the criteria of minimum subscription, the Company has the right to reject or accept an application, fully or partially.

Successful applicants become shareholders of the Company on payment of allotment money.

Subsequently, the shareholders can pay the balance amount to the Company as and when the Company calls for it. This is known as ‘call money’.

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