How a company is formed: promotion and feasibility studies, the memorandum and articles, incorporation, and capital subscription with the minimum subscription rule.
| Minimum subscription (SEBI) | 90% of the issue size |
| Size of the issue | shares offered × issue price |
| Least shares that must be applied for | 90% of the shares offered |
| If the minimum is not received | no allotment; all application money is refunded |
| Clauses of the memorandum | name, registered office, objects, liability, capital, association (subscription) |
| Memorandum vs articles | objects and dealings with outsiders vs internal rules; the memorandum is harder to alter |
| Filed for incorporation | memorandum, articles, directors’ consent, name approval, statutory declaration, registered office notice, fees |
| Every director | must first obtain a Director Identification Number |
A company offers 4,100,000 shares and receives applications for 3,485,000 shares. Can it allot shares? Why?
Working: 90% of 4,100,000 = 3,690,000
Answer: No: the minimum subscription is 3,690,000 shares (90%), and it received 3,485,000. All application money must be refunded.