Discuss the process for the allotment of shares of a company in case of oversubscription.

— Kishore V, SME and ACW at Edumarz

1. When well-managed and financially healthy corporations give shares to the public for subscription through a prospectus, it is possible that the total number of applications received for shares surpasses the number of shares provided to the public; this is known as an over-subscription situation. 
2. In the event of an over-subscription of shares, a firm might choose from one of three options for allocating shares.

1.I) Excess applications are rejected, and funds collected on such applications are refunded to the applicants.

(ii) If the Applicant is allocated on a partial basis (or on a pro-rata basis): 

• Pro-rata allocation occurs when a firm allots shares proportionately to all applicants in the event of an over-subscription.
  
  
• In this scenario, the key issue is deciding what to do with the additional funds received at the time of application.
• In practice, refunding the surplus money first and then asking the allottee applicants to pay the allocation money is unreasonable.

(iii) Pro-rata and Money Refund: 

In the event of an over-subscription, the director can combine the above two options, accepting full allocation to certain applicants, a pro-rata allotment to others, and no allotment to the remaining applications.