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Firm Underwriting 038 The benefit of firm underwriting is given to individual underwriter The benefit of firm underwriting is not given to individual underwriter Not
Firm Underwriting 038 The benefit of firm underwriting is given to individual underwriter The benefit of firm underwriting is not given to individual underwriter Not Treated as unmarked application Treated as unmarked application Illustration 2 Rosy Ltd. made a public issue of 4,00,000 equity shares of 7 10 each, 72 payable on application. The entire issue was underwritten by five underwriters as follows: A: 25%, B: 25% C: 25%, D: 10% and E: 15%. Under the underwriting terms, a commission of 2% was payable on the amount underwritten. Further, the underwriter was at liberty to apply, during the tenure of public issue, for any number of shares in which case he was entitled to a brokerage equal to 1/2% of the par value of shares so applied for. Applications received were to be analyzed on the basis of rubber stamp of the underwriter, who was to be given credit for the number of applications received bearing his rubber stamp. Applications received which did not bear any rubber stamp were considered as "direct applications to be credited to all the underwriters in the ratio of their respective underwriting commitment. If any such credit being given a "surplus* was to result in respect of any underwriter, as compared to his commitment, such surplus was to be distributed amongst the remaining underwriters in the ratio of their respective underwriting commitments. As a result of the issue the following applications were received: Bearing rubber stamp of A 1,02,000 shares -Do- B 95,000 shares -Do- 60,000 shares -Do- D 32,000 shares -Do- E 51,000 shares Not bearing any stamp 10.000 shares 3.50.000 shares Included in the number of applications mentioned against D in the above table was an application made by D himself for 10,000 shares. The underwriters were informed of the amounts due to or from them, the amounts were duly received or paid. Show, with the aid of necessary workings, the entries to record the amount so received or paid
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