Minimum subscription is the minimum amount that, in the opinion of directors, must be raised to meet the needs of business operations of the company relating to:
(A) The price of any property purchased, or to be purchased, which has to be met wholly or partly out of the proceeds of issue;
(B) Preliminary expenses payable by the company and any commission payable in connection with the issue of shares;
(C) Working capital;
(D) Any other expenditure required for the usual conduct of business operations
Choose the correct answer from the options given below:
Minimum subscription is the minimum amount that, in the opinion of directors, must be raised to meet the needs of business operations of the company relating to:
(A) The price of any property purchased, or to be purchased, which has to be met wholly or partly out of the proceeds of issue;
(B) Preliminary expenses payable by the company and any commission payable in connection with the issue of shares;
(C) Working capital;
(D) Any other expenditure required for the usual conduct of business operations
Choose the correct answer from the options given below:
Solution
Minimum Subscription refers to the minimum amount of capital that must be raised by a company through its public issue to commence business operations. This amount is determined by the directors based on the company's initial financial requirements.
The minimum subscription must be sufficient to cover:
(A) Price of property purchased or to be purchased - Any immovable or movable property that the company needs to acquire, whether already purchased or planned, must be funded from the issue proceeds.
(B) Preliminary expenses and commission - All expenses incurred before the company's incorporation (like legal fees, registration fees) and any commission paid to underwriters or brokers for the share issue must be covered.
(C) Working capital - The company needs sufficient funds for day-to-day operations like purchasing raw materials, paying salaries, and meeting other operational expenses.
(D) Other expenditure for usual business operations - Any additional expenses required for normal business functioning, such as rent, utilities, administrative costs, etc.
All four components collectively ensure that the company has adequate funds to start and sustain its business operations effectively. The directors must carefully assess these requirements before determining the minimum subscription amount.
Correct Answer: Option 3 - (A), (B), (C) and (D)
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