Question

Give the meaning of over subscription.

Hint:

Remember the three scenarios: Under-subscription (Applied < Issued), Full-subscription (Applied $=$ Issued), and Over-subscription (Applied > Issued).

Answer 1

Step 1: Understanding the Concept:
When a company invites the public to buy its shares, the public responds by sending applications. The relationship between the number of shares offered and the number applied for determines the subscription status.

Step 2: Detailed Explanation:
Over-subscription occurs when the number of shares applied for by the public is strictly greater than the number of shares offered by the company for subscription.
For example, if a company issues 10,000 shares but receives applications for 15,000 shares from the public, the issue is said to be over-subscribed. In such cases, the company cannot allot more shares than it originally issued, leading to rejection of excess applications or pro-rata allotment.

Step 3: Final Answer:
Over-subscription refers to a situation where the number of shares applied for by the prospective investors is more than the number of shares offered by the company.