Question

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:

• A. (A), (B) and (D)
• B. (A), (B) and (C)
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D)

Hint:

To remember this concept, think of "Minimum Subscription" as the Survival Fund. A company isn't allowed to start its journey if it hasn't collected enough money to pay for its "house" (Property), its "setup fees" (Preliminary expenses), and its "monthly bills" (Working capital).

Answer 1

The Correct Option is C

Concept: Minimum subscription is the minimum amount of capital that a company must receive through a public issue before it can proceed with the allotment of shares. This requirement exists to ensure the company has sufficient funds to cover its foundational and immediate operational costs.

Step 1: Analyze the components . According to the Companies Act, the minimum subscription amount must be sufficient to cover the following:
• Asset Acquisition (A): Payment for property already purchased or to be purchased to set up operations.
• Initial Expenses (B): Payment of preliminary expenses (like registration fees) and underwriting commissions or brokerage fees for the share issue.
• Liquidity (C): Ensuring enough working capital is available to fund day-to-day business cycles.
• General Operations (D): Any other essential expenditure required to maintain the usual conduct of business.

Step 2: Conclusion.
Since all four points (A, B, C, and D) represent the core needs that directors must consider when determining the minimum subscription amount, the correct choice is (c).