Question

Explain the following term/concept.

Minimum subscription

Answer 1

1. Minimum subscription is the minimum amount raised by the company for obtaining a trading certificate and to start the work of allotment of shares. This amount is mentioned in the prospectus.
2. It must be collected within thirty (30) days from the issue of prospectus. The minimum subscription amount should be 90% of the issued capital.

Answer 2

According to Section 39 (1) of the Companies Act of 2013, a company is not permitted to offer any of its securities to the public unless the minimum amount specified in the prospectus has been subscribed for and the amount owed upon application for the amount so specified has been paid to the company by check or another payment instrument.

There is no minimum subscription required by the Companies Act of 2013. But before a company can proceed with share allocation, SEBI (Securities and Exchange Board of India) has mandated that it must receive at least 90% of issued share capital.