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Precis Writing Solved Exercise for Class 10, Class 12 and Graduation Classes, Competitive Exams, Solved Precis 7

Precis No. 7

Sometimes the promoters of a public company are not quite sure whether the public response in the shape of subscription for shares would be encouraging. As they are anxious that the company they have helped to promote should start functioning and should not be closed for want of public support, they enter into an arrangement which ensures the supply of adequate capital. This arrangement is called “Underwriting Arrangement”. In this the promoters or those interested in the formation of the company enter into an agreement usually with a firm of brokers or financiers, called “underwriters” by which for a certain agreed commission on the issued capital, the underwriters agree to take up that portion of the issued capital which is not subscribed for by the public. The usual procedure is to approach responsible firm of financiers and supply them with an advance copy of the prospects, after studying which they can decide whether they will guarantee or underwrite the issue if they are satisfied with the future of the company. If the issues proves a success and there are applications for all the shares placed on the market, the liability of the underwriter ceases. If, however, the issue is not wholly subscribed, the balance has to be taken up and for by the underwriter.

 

Solved Precis 

Title : Promoters and Underwriters

Precis : Quite often the promoters of a public company are not very sure of the public response. So for supply of adequate capital they enter into an agreement with, a firm of brokers called underwriters for an agreed commission on the issued capital not subscribed by the public. For this they follow the prescribed procedure and if the firm is satisfied only then they underwrite the issue.

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