Page 4 - Lesson Note 8

company inviting funds from the general public must make adequate disclosure of all relevant
information and must not conceal any material information from the potential investors.

2. Filing of Prospectus: A copy of the prospectus or statement in lieu of prospectus is filed with the
Registrar of Companies. A prospectus is ‘any document described or issued as a prospectus including
any notice, circular, advertisement or other document inviting deposits from the public or inviting offers
from the public for the subscription or purchase of any securities of, a body corporate’.

3. Appointment of Bankers, Brokers, and Underwriters: Raising funds from the public is a stupendous
task. The application money is to be received by the bankers of the company. • The brokers try to sell
the shares by distributing the forms and encouraging the public to apply for the shares. Underwriters
undertake to buy the shares if these are not subscribed by the public

4. Minimum Subscription:

In order to prevent companies from commencing business with inadequate resources, it has been
provided that the company must receive applications for a certain minimum number of shares before
going ahead with the allotment of shares. According to the Companies Act, this is called the ‘minimum
subscription’. Applications received for the shares are for an amount less than 90 per cent of the issue
size, the allotment cannot be made and the application money received must be returned to the
applicants.

5. Application to Stock Exchange: An application is made to at least one stock exchange for permission
to deal in its shares or debentures. If such permission is not granted before the expiry of ten weeks
from the date of closure of subscription list, the allotment shall become void and all money received
from the applicants will have to be returned to them within 8 days

6. Allotment of Shares: Till the time shares are allotted, application money received should remain in a
separate bank account and must not be used by the company. In case the number of shares allotted is
less than the number applied for, or where no shares are allotted to the applicant, the excess
application money, if any, is to be returned to applicants or adjusted towards allotment money due from
them. Allotment letters are issued to the successful allottees. ‘Return of allotment’, signed by a
director or secretary is filed with the Registrar of Companies within 30 days of allotment

IV. COMMENCEMENT OF BUSINESS: https://www.youtube.com/watch?v=xLNadN-sPic

To commence business a public company has to obtain a certificate of commencement of Business. For
this the following documents have to be filled with the registrar of companies.

1. A declaration that 90% of the issued amount has been subscribed.

2. A declaration that all directors have paid in cash in respect of allotment of shares made to them.