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Over Subscription of Shares: Rejection of Excess Applications Video Lecture | Accountancy Class 12 - Commerce

FAQs on Over Subscription of Shares: Rejection of Excess Applications Video Lecture - Accountancy Class 12 - Commerce

1. What is over-subscription of shares?

Ans. Over-subscription of shares refers to a situation where the number of applications received for purchasing shares exceeds the number of shares available for allocation. This typically occurs when a company issues new shares to the public or existing shareholders, and the demand for those shares exceeds the supply.

2. What happens if there is over-subscription of shares?

Ans. When there is an over-subscription of shares, the company may have to reject excess applications and allocate shares on a pro-rata basis. This means that each applicant will receive a proportionate allocation based on the number of shares they applied for relative to the total demand. The company will refund the excess application money to those whose applications were rejected.

3. How does a company decide which applications to reject in case of over-subscription?

Ans. In case of over-subscription, a company may use different methods to decide which applications to reject. They may prioritize existing shareholders, employees, or other specific groups before considering applications from the general public. The company may also consider factors like the size of the application, the applicant's history with the company, or use a lottery system to determine the allocation of shares.

4. Can I apply for more shares than what is available during an over-subscription?

Ans. Yes, you can apply for more shares than what is available during an over-subscription. However, if the demand exceeds the supply, the company will only allocate shares on a pro-rata basis, and you may receive a proportionate allotment based on the total demand. The excess application money for the unallocated shares will be refunded to you.

5. How can I increase my chances of getting a higher allocation of shares during an over-subscription?

Ans. To increase your chances of getting a higher allocation of shares during an over-subscription, you can consider applying for a larger number of shares. However, it is important to note that the final allocation is based on the total demand and the company's allocation policy. Additionally, being an existing shareholder or having a good relationship with the company may also increase your chances of receiving a higher allocation.

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Sep 03, 2025 Last updated

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