1. Meaning : Public company invites public for the subscription of shares through prospectus. Progressive and favoured companies get overflowing subscription wheie as some of the companies are uncertain about the mimimum subscription. In this situation company can not start its business. Thus, it is necessary for a company to have minimum amount of subscription for starting the business.
2. Meaning of Minimum Subscription : The amount of Minimum subscription to be obtained by each company is not mentioned in the Companies Act. Thus, the directors and other experts decide the amount of Minimum Subscription by sitting together.
Meaning : The minimum amount of share purchase required in order to start proper business as per its wish is called Minimum Subscription.
3. Legal provisions for the Minimum Subscription:
(1) As per the Companies Act 2013, the amount of minimum subscription should be received within 30 days from the date of issuing prospectus.
(2) If the amount of Minimum Subscription is not received within the stipulated time or the time limit prescribed by the SEBI, then such amount is required to be returned as per the directons of SEBI.
(3) In case of failure to get Minimum Subscription if the amount is not returned to the applicants as per the directions of SEBI, then the concerned officers are liable to pay fine.
(4) A company can not allot shares if Minimum Subscription is not received.
4. Importance of Minimum Subscription:
(1) For securing interest of Investor : In order to secure the interest of the investors the provisions of Minimum Subscription is made in the Companies Act.
(2) For distribution of Securities : A company can distribute its securities only when the amount of minimum subscription is received.
(3) Save the investors from the loss : Some dishonest or inexperienced directors establish a company with insufficient capital. As a resultant effect business can not run in a systematic manner and the investors have to lose their invested money.
(4) Guidelines of SEBI : To receive minimum amount on share time limit is prescribed by the SEBI and if a company is not able to received minimum Subscription in that particular time limit then such amount is required to be returned as per the directions of the SEBI.
(5) Liability of officers in case of violation of Law: The concerned officers are liable to pay fine on violation of provisions of Companies Act. So, the investors feel safety of their money.
(6) Registered with company Registrar : The hares allotted to the investors are registered with the registrar of Companies. So the problemof fack allotment does not arise.
(7) Increase the trust of investors : Minimum Subscription makes sure that the company is going to establish. Thus, investors feel trust to invest their money in the company.
5. Conclusion : The Security Exchange Board of India (SEBI) keeps an eye on the investment proceedings of the Companies and it secures the interest of the investors by the provision of Minimum Subscription.