The maximum share application money can be :

Question

Accepted Answer

The correct option is 4: Full issue price of the shares.
The maximum share application money that a company can ask for is the full issue price of the shares. While the Companies Act and SEBI guidelines mandate a *minimum* amount to be collected on application to protect investors and ensure the company has genuine interest in the issue, there is no upper limit that restricts a company from collecting the entire issue price at the time of application. For instance, in a fully paid-up issue or when a company decides to make a single call for simplicity and to access funds immediately, the application money will be equal to the total issue price. Therefore, the maximum possible amount a company can legally demand as share application money is the total price at which the share is offered to the public, which is the full issue price.

The incorrect option is 1: 5% of the nominal value of shares.
This option represents the *minimum* amount of share application money that a company must receive from applicants, as historically stipulated under the provisions of the Indian Companies Act, 1956, and sometimes referenced conceptually in regulatory bodies' guidelines. This minimum requirement ensures that the issue is not made without serious investor interest, thereby protecting the public from speculative or non-serious offerings. However, it is a lower bound, not the legal or practical maximum possible amount. Furthermore, for a public issue, SEBI regulations often specify a minimum percentage (e.g., 25%) based on the *issue price*, which may be different from the nominal value, making this figure an incorrect representation of the maximum.

The incorrect option is 2: 20% of the nominal value of shares.
This is an arbitrary percentage that does not represent any specific maximum limit prescribed by the relevant regulatory bodies in the context of share issue. Companies have the flexibility to determine the installment structure for share payments, including the application money. Mandating a maximum of only 20% would be unnecessarily restrictive for a company that wishes to collect a higher percentage, or even the entire payment, upfront to gain immediate access to the capital. Since a company can legally issue shares that are fully paid up on application, 20% cannot be the correct maximum.

The incorrect option is 3: 50% of the nominal value of shares.
Similar to the 20% option, 50% of the nominal value is not a legally defined maximum for the share application money. While a company may structure its share calls such that the application money constitutes 50% of the nominal value, this remains a decision made by the company's management and is not a regulatory ceiling. The actual maximum is determined by the full issue price of the share, which could be the nominal value, or a higher amount if the share is issued at a premium. Therefore, a regulatory maximum of 50% is incorrect, as the application money can lawfully cover the entire amount.