How to Issue Shares in a Corporation
If you're wondering how to issue shares in a corporation, you're probably thinking about a company issuing shares as a way to gain the necessary capital.3 min read
If you're wondering how to issue shares in a corporation, you're probably thinking about a company issuing shares as a way to gain the necessary capital for business endeavors or expansion. Shareholders of public companies must approve this move beforehand, and there are a number of steps and limitations that must be considered before proceeding.
Procedure For Issuing Shares
The procedure for issuing shares includes:
- Creating a prospectus.
- Submitting the application of shares.
- Completing the allotment of shares.
- Issuing the call on shares.
The first step is developing a prospectus, which is a document that publicly invites potential investors to buy shares in the company. Before the document is published, a copy must be submitted to the Securities and Exchange Commission. If a business operates as a private company or privately issues shares, it does not need to draft a prospectus. The information within the prospectus includes information regarding the company's management, activity up to that date, details regarding the need for issuing shares, and other relevant information for a potential investor.
The application of shares is a form used by potential investors to submit their intention to buy shares in that company. If the number of issued shares is lower than that of requested shares, an oversubscription occurs. If, on the other hand, there are more shares than requested, it is called an under-subscription. The applications are issued to a designated bank, and the funds are only transferred when the procedure is complete.