Explain the process of capital subscription for a public limited company .
Dear Students
A Public Company is allowed to raise their funds from the public by issuing shares. Before that it has to issue a prospectus for the public to subscribe to the capital of the Company and undergo various other formalities. The steps required for raising the money from public are:
1. SEBI Approval:- SEBI (Securities Exchange Board of India) is a regulatory body to control capital markets in India. It has published guidelines for the disclosure of information and investor protection.Company has to make sufficient disclosure of all relevant information and must not conceal any information. Prior permission is required from SEBI for raising funds from public.
2. Filing of Prospectus:- Prospectus or statement in lieu of prospectus has to be filed with registrar of companies. A prospectus is a document inviting general public to subscribe to the shares of the company.
3. Appointment of bankers, brokers, underwriters:- The bankers are appointed to receive application money from the public. The application money goes to separate bank account opened by the company for this purpose. Brokers encourage public to subscribe to the shares of the company. If the company is not share of selling whole of the shares, it may appoint underwriters. Unsold shares purchase by the brokers who charge commission for this service.
4. Minimum Subscription:- A company must sell minimum number of shares before starting the next process. This is called minimum subscription. As per SEBI guidelines, a company must receive 90 per cent of issued amount with in 120 days from the date of issue of prospectus.
5. Application to stock exchange:- Application is sent to at-least one stock exchange for the permission to deal with the shares of the company. The allotment shall become void and all money received form applicants will have to be returned with in eight days if such permission is not allotted within 10 weeks of the closure of subscription.
6. Allotment of shares:- After getting the shares listed, the company makes allotment of shares. A list is prepared giving details about names and address of all the shareholders and number of shared allotted. The company has to submit a return of allotment with the registrar giving details of shares allotted to each shareholder.
Regards
A Public Company is allowed to raise their funds from the public by issuing shares. Before that it has to issue a prospectus for the public to subscribe to the capital of the Company and undergo various other formalities. The steps required for raising the money from public are:
1. SEBI Approval:- SEBI (Securities Exchange Board of India) is a regulatory body to control capital markets in India. It has published guidelines for the disclosure of information and investor protection.Company has to make sufficient disclosure of all relevant information and must not conceal any information. Prior permission is required from SEBI for raising funds from public.
2. Filing of Prospectus:- Prospectus or statement in lieu of prospectus has to be filed with registrar of companies. A prospectus is a document inviting general public to subscribe to the shares of the company.
3. Appointment of bankers, brokers, underwriters:- The bankers are appointed to receive application money from the public. The application money goes to separate bank account opened by the company for this purpose. Brokers encourage public to subscribe to the shares of the company. If the company is not share of selling whole of the shares, it may appoint underwriters. Unsold shares purchase by the brokers who charge commission for this service.
4. Minimum Subscription:- A company must sell minimum number of shares before starting the next process. This is called minimum subscription. As per SEBI guidelines, a company must receive 90 per cent of issued amount with in 120 days from the date of issue of prospectus.
5. Application to stock exchange:- Application is sent to at-least one stock exchange for the permission to deal with the shares of the company. The allotment shall become void and all money received form applicants will have to be returned with in eight days if such permission is not allotted within 10 weeks of the closure of subscription.
6. Allotment of shares:- After getting the shares listed, the company makes allotment of shares. A list is prepared giving details about names and address of all the shareholders and number of shared allotted. The company has to submit a return of allotment with the registrar giving details of shares allotted to each shareholder.
Regards