What is underwriting of shares?

Question

What is underwriting of shares? Who are the underwriters?

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William 1 year 1 Answer 277 views Silver 0

Answer ( 1 )

  1. A company may raise funds through various mean. When it wishes to raise capital through share capital Route, It has to fulfill certain conditions like minimum subscription, Documentation etc.

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    A company can utilize the share application money only if it has got minimum 90% of the issue subscribed. Fulfilling this 90% criteria sometimes get difficult, at that time underwriting is a boon to that company. Underwriting is a process in which underwriters to the issue are appointed, who will buy the shares or securities if the company fails to fulfill minimum subscription condition. The person who are underwriting an issue are called the underwriters to an issue.

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    The rules governing the underwriting are provided by the Company law and SEBI (Underwriters) Regulations, 1993.

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