Question

Which are two options available with the company in the condition of Over-subscription? Write.

Hint:

Over-subscription options: Rejection method or Pro-rata allotment.

Answer 1

When a company receives more applications than the number of shares offered, it faces over-subscription. In such cases, the company has two main options. First, it may adopt the rejection method, where excess applications are completely rejected and application money is refunded. Second, it may use the pro-rata allotment method, where shares are allotted proportionately to applicants based on the number of applications received. Under this method, applicants receive fewer shares than they applied for, and excess application money is either refunded or adjusted towards allotment or call money. These options help the company manage excess demand fairly and maintain transparency in the allotment process.