What is the difference between over subscription and under subscription of shares?
When number of shares subscribed is greater than number of shares issued, it is said as Over Subscription of shares.
When number of shares subscribed is lesser than number of shares issued, it is said as Under Subscription of shares.
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Over Subscription
When number of application received is more than the numbers of shares invited. It is Over Subsciption
For Example:- IXcom Ltd issued application for 10000 equity shares. it received application for 100000 equity shares. It is called Over Subscription
Under Subscription
When number of application received is less than the numbers of shares invited. It is Under Subsciption
For Example:- IXcom Ltd issued application for 100000 equity shares. it received application for 10000 equity shares. It is called Under Subscription
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If any company recives more appliacation from issue app. Than company have to refund money or issue share on pro rata basis.. this situation is know as oversubscrption..
Hope u understand
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Undersubscription refers to when application received less than the invited shares a company can issue shares only if it received minimum subscription i.e 90 percent of invited shares
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A company offers?shares?to the public inviting applications for their subscription. When the number of shares applied for by the public is less than the number of shares issued by the company, it is a situation of under-subscription.
And
When the number of shares applied by the public is more than issued share by the company it's called over- subscription .
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Basis | Oversubscription of shares | Undersubscription of shares |
Shares applied |
No. of shares applied is more than the shares offered for subscription. | Number of shares applied is less than the shares offered for subscription. |
Acceptance |
All applications are not accepted. Some are rejected. Alternatively, shares are allotted on pro rata basis. | All application for shares is accepted and allotment is made to all applicants. |
Refund |
Excess application money is refunded or adjusted towards allotments and calls. | As all applications are accepted, there is no excess application money to be refunded. |
Minimum subscription | They don’t face such a problem. | The company may face the minimum subscription problem. |
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~Eg=company issued 10000 shares to public But the public applied for 15000 shares.
So here 5000 shares is oversubscribed and its a case of oversubscription...
?Undersubscription means when share are undersubscribed that is less applied for than issued by the comapny.
~Eg=A company issued for 10000 shares to public but Public applied for 8000 shares.
It's a case of undersubscription.
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Company's Act, payable on the following basis:
a) To applicants for 35,000 shares in full
b) To applicants for 20,000 shares- 15,000 shares Excess money paid on application was utilized towards allotment money.
A shareholder who was allotted 1.500 shares out of the group applying for 20,000 shares failed to pay
allotment money and money due on calls, these shares were forfeited 1,000 forfeited shares were reissued
as fully paid on receipt of Rs.8 per share. Show the journal entries in the books of the company.
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