Process of issue of equity shares

Process of issue of equity shares

A company can issue shares as per the provisions of the Indian Companies Act and as per the guidelines issued by Securities and Exchange Board of India (SEBI).

Inviting subscription: A public company has to issue a prospectus and invite the general public to subscribe for its shares.

Receipt of application: On the basis of the prospectus, applications are deposited in a scheduled bank by the applicants along with application money within the time specified. Application money must be at least 5 per cent of the nominal value of the shares.

Allotment of shares: When the minimum subscription stated in the prospectus has been subscribed for by the public, a company can allot shares. For those to whom shares could not be allotted, their application money will be refunded. If the minimum subscription is not received, all the application money received has to be refunded to the applicants.

A company may issue equity shares either for cash or for consideration other than cash. When shares are issued for cash, the cash may be received (a) in instalments or (b) at one time (lumpsum).