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Capital Subscription and One Person Company

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35 views2 pages

Capital Subscription and One Person Company

Uploaded by

aaryaveerch.0001
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Capital Subscription

A public company can raise the required funds from the public by means of issue of securities (shares
and debentures etc.). For doing the same, it has to issue a prospectus which is an invitation to the public
to subscribe to the capital of the company and undergo various other formalities. The following steps
are required for raising funds from the public:
SEBI Approval: SEBI (Securities and Exchange Board of India) which is the regulatory authority in our
country has issued guidelines for the disclosure of information and investor protection. A public company
inviting funds from the general public must make adequate disclosure of all relevant information and must
not conceal any material information from the potenti al investors. This is necessary for protecting
the interest of the investors. Prior approval from SEBI is, therefore, required before going ahead with
raising funds from public.
Filing of Prospectus: A copy of the prospectus or statement in lieu of prospectus is filed with the
Registrar of Companies. A prospectus is an invitation to the public to apply for securities (shares,
debentures etc.) of the company or to make deposits in the company. Investors make up their minds
about investment in a company primarily on the basis of the i n form atio n contained in this document.
Therefore, there must not be a mis-statement in the prospectus and all m ateri al sig ni fi cant
information must be fully disclosed.
Appointmen t of Bank ers, Brokers, 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. If the company
is not reasonably assured of a good public response to the issue, it may appoint underwriters to the issue.
Underwriters undertake to buy the shares if these are not subscribed by the public. They receive a
commission for underwriting the issue. Appointment of underwriters is not necessary.
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’. As per the S EBI Guidelines the
limit of minimum subscription is 90 per cent of the size of the issue. Thus, if 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.
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 eight days.
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.
A public company may not invite public to subscribe to its securities (shares, debentures etc.).
Instead, it can raise the funds through friends, relatives or some private arrangements as
done by a private company. In such cases, there is no need to issue a prospectus. A ‘Statement
in Lieu of Prospectus’ is filed with the Registrar at least three days before making the allotment.

One Person Company


With the implementation of The Companies Act, 2013, a single person could constitute a company, under the One
Person Company (OPC) concept.The introduction of OPC in the legal system is a move that would encourage
corporatisation of micro businesses and entrepreneurship.

One Person Company is a company with only one person as a member. That one person will be the shareholder of
the company. It avails all the benefits of a private limited company such as separate legal entity, protecting personal
assets from business liability and perpetual succession.
Characteristics
(1) Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a
One Person Company;
Note: The term “resident in India” means a person who has stayed in India for a period of not
less than one hundred and eighty two days during the immediately preceding one calendar year.

(2) No person shall be eligible to incorporate more than a One Person Company .

(3) No minor shall become member of the One Person Company .

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