QS Study

Minimum Subscription of a Joint Stock Company

At the initial stage of the formation of the Joint Stock Company needs some money and in the memorandum of association and prospectus, there is a clause about the collection of initial money and working capital. The collection of the minimum capital is given that is called the minimum subscription.

According to the Company Act, 1994 section 148 (8) the public limited company must collect the minimum subscription because for collecting the certificate of commencement and the distribution of the shares need this money. So if the company does not have this subscription then it cannot collect the letter of the commencement and distribute the shares. According to this Act section 148 (2) reasons for collecting the minimum subscription are given below:

  • To facilitate the initial expenses and the expenditure of the formation of the company.
  • If an asset is purchased before far meeting up this cost and for paying the loan that is made for the initial expense.
  • For providing the commission
  • For collecting the working capital etc.

For the formation of the company collection of minimum subscription is very much important because without this subscription the company cannot start up its activities.