Minimum Subscription – Meaning and Explanation

Q. Explain in brief Minimum Subscription.

Ans. Section 39(1) of the Companies Act, 2013 provides that a company cannot allot any securities of the company to public unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been received by the company by cheque or other instrument which has been paid.

Minimum Subscription means the amount which, in the opinion of the directors, is the minimum to be raised by the issue of shares so as to provide for the following requirements :

(i) For the payment of purchase price of any property purchased or agreed to be purchased;

(ii) For the payment of preliminary expenses, including underwriting commission and brokerage on issue of shares;

(iii) For the repayment of any moneys borrowed by the company for the above purposes;

(iv) For working capital; and

(v) For any other expenditure required for the usual conduct of business operations.

According to SEBI Guidelines minimum Subscription has been fixed at 90% of the issued amount. As per section 39(3) the company has to get minimum subscription within 30 days from the date of the issue of the prospectus. If the company fails to receive the minimum subscription within the said period, the company cannot proceed for the allotment of shares and the entire application money must be returned within next 15 days. If there is delay in refund of such amount by more than 15 days, the company shall be liable to repay it with interest at the rate of 12% per annum for the delayed period.