Explain the term,' Minimum subscription'?

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Answer

According to the SEBI, a company can't start the process alloting shares unless and until the provision of minimum subscription would not be fulfilled by the company. The minimum subscription says that the applications should receive application for atleast 90%of the issued shares. There is provision for this because it's providing safety to the investors who are investing in the company..that if the company will allot the share even at minimum subscription not being fulfilled then company will carry on his business with less amount..so it might be possible of inability of the company to bear any losses if incurred in the running business..That's y minimum subscription should have to be fulfilled.. one other reason is also that the company has incurred some preliminary expnese that has to be paid through the fulfillment of minimum subscription... so minimum subscription should be fulfilled..

Answer

Shares the company needs to get from the public out of the total issue by the date of closure. (Presently every company need to raise 90% of the issued amount). Else, the company shall refund the whole amount received.

Answer

Minimum Subscription: Explained

Minimum subscription refers to the minimum amount of money or quantity of shares that an investor must commit to when participating in a subscription offer for securities, such as stocks, bonds, or mutual funds. It is a predetermined threshold set by the issuer or the investment firm to ensure a minimum level of participation from investors.

Importance of Minimum Subscription

Setting a minimum subscription threshold serves several purposes:

1. Ensuring Sufficient Capital: By setting a minimum subscription, the issuer or investment firm aims to ensure that they receive a minimum level of capital from investors to meet their funding requirements or project goals. This helps avoid situations where the subscribed capital falls short of the desired amount, which could potentially jeopardize the success of the offering.

2. Reducing Administrative Costs: Implementing a minimum subscription helps reduce administrative costs associated with processing small investments. It allows issuers to focus their resources on managing larger investments that have a more significant impact on their financial objectives.

3. Maintaining Liquidity: Minimum subscriptions also help maintain liquidity in the market by discouraging small, fragmented investments. This prevents excessive trading of small quantities of securities, which can lead to higher transaction costs and market inefficiencies.

Compliance with Regulatory Requirements

Setting a minimum subscription is often a regulatory requirement in many jurisdictions. Regulators may stipulate minimum subscription limits to protect retail investors from investing small amounts in complex or high-risk securities. This ensures that investors have a certain level of financial capability and understanding before participating in such offerings.

Flexibility in Setting Minimum Subscription

The minimum subscription amount can vary depending on the type of securities being offered and the specific regulations in place. It is typically determined by the issuer or investment firm and is disclosed in the subscription offer documents. The minimum subscription can be a fixed monetary amount or a specific quantity of shares.

Conclusion

Minimum subscription plays a crucial role in investment offerings, as it helps ensure the success of the offer, reduces administrative costs, maintains market liquidity, and complies with regulatory requirements. Investors should carefully review the minimum subscription amount before participating in a subscription offer to ensure they meet the specified threshold.

Answer

When a company receives less application of share than the number of share offered ... it is minimum subscription..

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