As per the Company Act a public company has to collect the amount of minimum Subscription within 30 days from the date of issuing prospectus. If the amount of minimum subscription is not received in prescribed time limit, then such amotrrrtls required to be returned as per the directions of the SEBI. In such circumstances -the promoters can not start business. Thus, promoters enters in to contract with under writers toênsure the amount of minimum Subscription. As per share underwriting contract brokers in consideration of the commission, give guarantee to the company that in case the securities issued for the public at large are not fully purchased by the public they would purchase the remaining shares and would make payment thereof.
Thus, due to underwriting contract there is no uncertainty for a company to collect capital. Therefore underwriting contract are considered as blessings for the company.