{"id":937,"date":"2025-11-10T00:00:00","date_gmt":"2025-11-10T00:00:00","guid":{"rendered":"https:\/\/rize.blog.razorpay.in\/minimum-subscription-companies-act-2013\/"},"modified":"1970-01-01T00:00:00","modified_gmt":"1970-01-01T00:00:00","slug":"minimum-subscription-companies-act-2013","status":"publish","type":"post","link":"https:\/\/razorpay.com\/rize\/blogs\/minimum-subscription-companies-act-2013\/","title":{"rendered":"Minimum Subscription- Companies Act 2013"},"content":{"rendered":"<h2 id=\"\"><strong id=\"\">What Does Minimum Subscription Mean?<\/strong><\/h2>\n<p id=\"\">Under the Companies Act, 2013, the term minimum subscription refers to the minimum amount that must be raised by a company issuing shares to proceed with an IPO.<\/p>\n<p id=\"\">As per <strong id=\"\">Section 39(1)<\/strong> of the Act and <a id=\"\" href=\"https:\/\/www.sebi.gov.in\/legal\/regulations\/mar-2025\/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-regulations-2018-last-amended-on-march-8-2025-_93559.html\" target=\"_blank\" rel=\"noopener\"><strong id=\"\">SEBI (ICDR) Regulations<\/strong><\/a>, a company must receive at least <strong id=\"\">90% of the total issue size<\/strong> through valid applications to consider the public issue successful.<\/p>\n<p id=\"\">If the <strong id=\"\">90% subscription threshold<\/strong> is not achieved:<\/p>\n<ul id=\"\">\n<li id=\"\">The company must <strong id=\"\">refund the entire application money<\/strong> to investors <strong id=\"\">within 15 days<\/strong> from the date of issue closure.<\/li>\n<li id=\"\">Failing to do so attracts <strong id=\"\">interest at 15% per annum<\/strong> on the delayed refund amount.<\/li>\n<\/ul>\n<p id=\"\"><strong id=\"\">Exceptions:<br \/><\/strong>Certain <strong id=\"\">infrastructure companies<\/strong> or those with alternative funding arrangements may be exempt from this rule, provided they disclose such arrangements in their prospectus.<\/p>\n<h2 id=\"\"><strong id=\"\">Benefits of the Minimum Subscription Requirement<\/strong><\/h2>\n<p id=\"\">The minimum subscription requirement plays a crucial role in maintaining a <strong id=\"\">healthy and transparent capital market<\/strong>. Its benefits include:<\/p>\n<ol id=\"\">\n<li id=\"\"><strong id=\"\">Investor Protection:<br \/><\/strong> Ensures that if the company fails to raise 90% of the funds, investors\u2019 money is refunded promptly-&nbsp; preventing financial loss.\n<\/li>\n<li id=\"\"><strong id=\"\">Capital Adequacy:<br \/><\/strong>Guarantees that the company has sufficient capital to execute its proposed business plans and avoid undercapitalisation.\n<\/li>\n<li id=\"\"><strong id=\"\">Market Sentiment Indicator:<br \/><\/strong>The subscription level reflects investor trust and market perception of the company\u2019s potential.\n<\/li>\n<li id=\"\"><strong id=\"\">Regulatory Compliance:<br \/><\/strong>Enforces SEBI and MCA norms, promoting corporate governance and adherence to financial disclosure standards.\n<\/li>\n<li id=\"\"><strong id=\"\">Transparency and Risk Mitigation:<br \/><\/strong>Reduces the risk of failed IPOs and fosters transparency by ensuring companies don\u2019t proceed without adequate funding.<\/li>\n<\/ol>\n<h2 id=\"\"><strong id=\"\">Acceptance of Application Deposit for Minimum Subscription<\/strong><\/h2>\n<p id=\"\">When inviting the public to subscribe for shares, companies must follow strict rules for <strong id=\"\">application deposits<\/strong> under the Companies Act, 2013:<\/p>\n<ul id=\"\">\n<li id=\"\">Each investor must pay <strong id=\"\">at least 5% of the nominal value<\/strong> of the shares applied for.<\/li>\n<li id=\"\">Payments can only be made <strong id=\"\">via cheque or demand draft<\/strong> \u2014 <strong id=\"\">cash payments are not allowed.<\/strong><\/li>\n<li id=\"\">All application money must be kept in a <strong id=\"\">separate bank account<\/strong> and cannot be used for: \n<ul id=\"\">\n<li id=\"\">Working capital needs<\/li>\n<li id=\"\">Loan repayments or short-term debts<\/li>\n<\/ul>\n<\/li>\n<li id=\"\">Funds can be used <strong id=\"\">only for purposes stated in the prospectus.<\/strong><\/li>\n<\/ul>\n<p id=\"\">The <strong id=\"\">90% minimum subscription ceiling<\/strong> applies even after excluding:<\/p>\n<ul id=\"\">\n<li id=\"\">Applications where cheques bounce<\/li>\n<li id=\"\">Defaulting or invalid subscribers<\/li>\n<\/ul>\n<p id=\"\">If a company mentions a <strong id=\"\">lower minimum subscription<\/strong> than 90% in its prospectus, it is considered <strong id=\"\">invalid<\/strong>. However, if it sets a <strong id=\"\">higher ceiling<\/strong>, the company must meet that higher percentage to proceed.<\/p>\n<h2 id=\"\"><strong id=\"\">Refund of Application Deposit for Minimum Subscription<\/strong><\/h2>\n<p id=\"\">If a company fails to achieve the <strong id=\"\">90% minimum subscription<\/strong>, it must <strong id=\"\">refund the entire application money within 15 days<\/strong> of the issue\u2019s closure date.<\/p>\n<p id=\"\">If the refund is delayed:<\/p>\n<ul id=\"\">\n<li id=\"\">The company is liable to pay <strong id=\"\">15% annual interest<\/strong> on the delayed amount.<\/li>\n<li id=\"\"><strong id=\"\">Directors are personally liable<\/strong> for ensuring refunds are made promptly.<\/li>\n<\/ul>\n<h2 id=\"\"><strong id=\"\">Filing Requirements of Minimum Subscription<\/strong><\/h2>\n<p id=\"\">Once the minimum subscription is achieved and shares are allotted, the company must fulfil <strong id=\"\">statutory filing obligations<\/strong> with the <a id=\"\" href=\"https:\/\/razorpay.com\/rize\/blogs\/what-is-roc-filing\/\"><strong id=\"\">Registrar of Companies (RoC)<\/strong><\/a>. The company must file <strong id=\"\">Form PAS-3 (Return of Allotment)<\/strong> within <strong id=\"\">30 days of share allotment<\/strong>.<\/p>\n<h3 id=\"\"><strong id=\"\">Key filing requirements:<\/strong><\/h3>\n<ul id=\"\">\n<li id=\"\">The filing must be authorised by a <strong id=\"\">Board Resolution.<\/strong><\/li>\n<li id=\"\">The form must be digitally signed by a <strong id=\"\">Chartered Accountant or Company Secretary.<\/strong><\/li>\n<li id=\"\">Filing fees depend on the company\u2019s <strong id=\"\">authorised share capital.<\/strong><\/li>\n<\/ul>\n<h3 id=\"\"><strong id=\"\">Mandatory attachments include:<\/strong><\/h3>\n<ul id=\"\">\n<li id=\"\"><strong id=\"\">List of allottees<\/strong> with details of shares allotted<\/li>\n<li id=\"\"><strong id=\"\">Contracts for non-cash consideration<\/strong> (if any)<\/li>\n<li id=\"\"><strong id=\"\">Valuer\u2019s Report<\/strong>, if applicable<\/li>\n<li id=\"\"><strong id=\"\">Board Resolution<\/strong> approving the allotment<\/li>\n<\/ul>\n<h2 id=\"\"><strong id=\"\">How to Calculate Minimum Subscription?<\/strong><\/h2>\n<p id=\"\">The <strong id=\"\">minimum subscription<\/strong> is calculated as <strong id=\"\">90% of the total shares offered in the IPO<\/strong>.<\/p>\n<p id=\"\"><strong id=\"\">Minimum Subscription = 90% x Total Shares Offered&nbsp;<\/strong><\/p>\n<p id=\"\">While calculating, companies should exclude:<\/p>\n<ul id=\"\">\n<li id=\"\">Rejected applications<\/li>\n<li id=\"\">Withdrawn or invalid applications<\/li>\n<\/ul>\n<p id=\"\">If the valid applications are <strong id=\"\">less than 90%<\/strong>, the company must <strong id=\"\">refund the entire amount<\/strong> within 15 days.<\/p>\n<h2 id=\"\"><strong id=\"\">Key Insights About Minimum Subscription<\/strong><\/h2>\n<ul id=\"\">\n<li id=\"\">Minimum subscription for an IPO is <strong id=\"\">90% of the issue size.<\/strong><\/li>\n<li id=\"\">Refunds must be made <strong id=\"\">within 15 days<\/strong> if the threshold is not met.<\/li>\n<li id=\"\"><strong id=\"\">Infrastructure companies<\/strong> may get exemptions under certain conditions.<\/li>\n<li id=\"\">Delays attract <strong id=\"\">15% annual interest<\/strong> and personal liability for directors.<\/li>\n<li id=\"\">Filing through <strong id=\"\">Form PAS-3<\/strong> within 30 days ensures compliance with the RoC.<\/li>\n<li id=\"\">The rule safeguards investors, enforces <strong id=\"\">SEBI and MCA regulations<\/strong>, and maintains <strong id=\"\">market confidence and credibility.<\/strong><\/li>\n<\/ul>\n<h2 id=\"\"><strong id=\"\">Frequently Asked Questions (FAQs)<\/strong><\/h2>\n<p id=\"\">\u200d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn the rules for minimum subscription under Section 39 of the Companies Act 2013. Understand its impact on share allotment, calculation, and consequences.<\/p>\n","protected":false},"author":1,"featured_media":938,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/937","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/comments?post=937"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/937\/revisions"}],"predecessor-version":[{"id":1279,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/937\/revisions\/1279"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media\/938"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media?parent=937"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/categories?post=937"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/tags?post=937"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}