Question

The underwriting commission in case of debentures as per the companies Act shall not exceed​

Answer 1

Answer:

According to Companies Act, underwriting commission should not exceed 5 per cent of the nominal value of a share and 2½ per cent in the case of debentures.

Explanation:

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Answer 2

Answer:

A company may enter into an underwriting or brokerage agreement for the sale of its shares and debentures. An underwriter guarantees that if the public do not take up all the shares, the underwriter will himself purchase the remaining shares and thus the company is able to obtain subscription for all the shares issued.

The company undertakes to pay an underwriting commission for the services rendered by the underwriters. According to Companies Act, underwriting commission should not exceed 5 per cent of the nominal value of a share and 2½ per cent in the case of debentures.