How many days can a Company call Minimum Subscription

Nov 19, 2020
  • A company is considered to be a separate legal entity. And hence, when one is started a minimum number of people are required. These people make contracts and do various things on behalf of the country. They are termed as subscribers.
  • Minimum subscription is always referred to the minimum number of shares required by the company from the public out of the total number, to be issued by the date of closure. The term member is defined in section 2(55) of the Companies Act, 2013.
  • This is a minimum amount decided mutually by the Directors to be raised out of the total issues, and this is utilized for various purposes like overcoming various expenses including working capital, repayment of borrowed money, preliminary expenses of various kinds etc.
  • This minimum amount is mentioned in the prospectus of the company, and it is the duty of the company to ensure that the minimum subscription of shares is fulfilled before it applies for getting certified for the commencement of its business.
  • In case the amount of money subscribed by the public is lesser than the amount that is required for minimum subscription, the company has to refund the entire sum to the applicants respectively. And the certification of commencement stands cancelled as the criteria are not met.
  • The Companies Act describes the number of people required for starting different types of companies. Minimum members for a private company are two, for a public company, seven people are required, and for a one-person company, only one member is required respectively.
  • The member's names are also entered in the MOA or the Memorandum of Association, according to which they agree to sign up to buy a certain amount of shares from the company.
  • If the company fails to get the minimum amount required for incorporation, it is bound to return all the money. It cannot make further allotments, in case the capital subscribed is less than the minimum subscription. The company gets 120 days to exceed the minimum subscription given in the prospectus, respectively.
  • Earlier there was no specific time limit for attaining a minimum subscription for the company. But after the Companies Act, 2013 special provisions were made for the same under section 56 of the Act.
  • In accordance with section 56, the company is required to issue a share certificate within two months from the date the company gets incorporated. Whether the amount is deposited or not, the share certificate is compulsory to be provided.
  • In case of Sant Chemicals Pvt Ltd v Sant Chemicals Pvt Ltd and ors, it was contended by the Court that people subscribing to the MOA become the members of the company on its registration or incorporation. The entry in the register of members hence is a mere procedure that is to follow later on.
  • The company issues the shares and hence has the right to call for the amount to be paid in instalments or full sum from the members. The company alerts the shareholders 14 days in advance for this payment. And in case they fail in doing so, the shares can be forfeited and reissued respectively.
  • Hence every shareholder has an obligation towards the company and needs to follow and fulfil certain prerequisites for the incorporation as well as running of the company. At the same time, the company also has to follow certain requirements of exceeding the minimum subscription before it gets incorporated.