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Which of the following order is followed in the issue of shares under the "Fixed Price Offer Method"? A. Issue of a prospectus B. Receipt by the company of application for share C. Selection of merchant banker D. Issue of share certificates E. Allotment of shares to the applicant Choose the correct answer from the options given below

Which of the following order is followed in the issue of shares under the "Fixed Price Offer Method"? A. Issue of a prospectus B. Receipt by the company of application for share C. Selection of merchant banker D. Issue of share certificates E. Allotment of shares to the applicant Choose the correct answer from the options given below Correct Answer C, A, B, E, D

The correct order is C, A, B, E, D

Key Points Fixed Price Offer Method of issue of shares:

  • In a fixed price offer method, the company going public sets a preset price for the shares it will sell to investors.
  • Before the company goes public, the investors are aware of the share price. Only after the issue has been resolved can the market's demand be determined.
  • The investor must apply and pay the entire share price in order to participate in this IPO.

Important Points Procedure for issue of shares using Fixed Price offer Method:

Step 1: Selection of Merchant Bankers: The first step is to choose a merchant banker who could serve as a lead manager and who will make the appropriate arrangements for the company's share issuance.

Step 2: Issue of Prospectus: To invite the public to subscribe for shares, the corporation first releases a prospectus. It is a document that solicits public contributions or offers for the subscription of the company's shares or debentures.

Step 3: Receipt of Application Money: With the information from the prospectus in hand, the prospective shareholders submit their application for the shares to a designated bank in block letters, together with the application fee (which should equal at least 25% of the share's face value). The business enters these details in the Application and Allotment Book once the subscription list has been closed.

Step 4: Receipt of Allotment Money/Allotment of Shares: In accordance with Sections 69 and 70 of the Companies Act, the Board of Directors allots the shares to the shareholders. The Board of Directors must determine a criterion for allotment if the public (shareholders) do not purchase all of the shares provided by the company or if more shares are requested than are available since they have the option to refuse or accept applications in part.

Step 5: Issue of share certificates: The right to receive a certificate of shares belongs to everyone whose name is listed as a member in a company's register of members (Article 7(1)—Table A, Schedule II).

Related Questions

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