BANKING AFFAIRS

Detailed explanation-1: -What is the limit of the commission set for Underwriting in India? Notes: The underwriting commission may not exceed 5 percent on shares and 2.5 percent in case of debentures. Underwriters get their commission irrespective of whether they have to buy a single security or not.

Detailed explanation-2: -According to Companies Act, underwriting commission should not exceed 5 percent of the nominal value of a share and 2.5 percent in the case of debentures.

Detailed explanation-3: -(ii) the commission paid or agreed to be paid does not exceed in the case of shares, five per cent. of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is less, and in the case of debentures, two and a half per cent.

Detailed explanation-4: -Underwriting is a contract whereby a responsibility is taken or a guarantee is given that. the shares or debentures of the company will be subscribed for. Some individuals, firms or. companies give a guarantee that so many shares of the company will be taken up by the public.

Detailed explanation-5: -According to SEBI the maximum commission payable to underwriters for underwriting the shares and debentures is 2.5% of the issued price. Advantages of Underwriting. 1. As underwriters guarantee the sale of shares and debentures, subscription of capital of the company becomes certain.