Mr. Nattu decided that he will sell the securities of his company to a selected group of people. Identify and explain briefly the method of floatation chose by Mr. Nattu
Answers
Explanation:
Floatation of a company is the legal process by which a company goes from being privately to publicly held. The floating process involves a percentage of the company (in the form of shares) being made available for purchase by the general investing public on a public investment exchange (such as a stock exchange).
The following steps should be taken by Mr. Amit in order to float the company:
1. SEBI Approval : SEBI regulates the capital market of India. To become a public company, approval from SEBI is required.
2. Filing of Prospects :- Prospects means any documents which invites offers from the public to purchase share and Debenture of the company.
3. Appointment of bankers, brokers, underwriters :- Banker of the company receive the application money. Brokers encourage the public to apply for the shares. underwriters are the person who undertake to buy the shares if these are not subscribed by the public. They receive a commission for underwriter.
4. Minimum subscription : According to the SEBI guide lines minimum subscription is 90% of the issue amount. If minimum subscription is not received then the allotment cannot be made and the application money must be returned to the applicants within 30 days.
5. Application to Stock Exchange :- It is necessary for a public company to list their shares in the stock exchange therefore the promoters apply in a stock exchange to list company shares.
6. Allotment of Shares : Allotment of shares means acceptance of share applied. Allotment letters are issued to the shareholders. The name and address of the shareholders submitted to the Registrar.
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