Q-1. State the guidelines for issue of share to the promoter.

Ans: The guidelines for issue of share to the promoters are as follows:
i) Promoters Contribution in a Public Issue by Unlisted Companies: In a public issue by
an unlisted company, the promoters shall contribute not less than 20% of the post issue
capital.

ii) Promoters Shareholding in Case of Offers for Sale: The promoter’s shareholding after
offer for sale shall not be less than 20% of the post issue capital.

iii) Promoters Contribution in Case of Public Issues by Listed Companies: In case of

public issues by listed companies, the promoters shall participate either to the extent of 20%
of the proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue
capital.

iv) Promoters Contribution in Case of Composite Issues: In case of composite issues of a

listed company, the promoters contribution shall at the option of the promoter(s) be either
20% of the proposed public issue or 20% of the post-issue capital. Rights issue component of
the composite issue shall be excluded while calculating the post-issue capital.

Q-2. What is over absorption of share?

Ans: Over absorption of share is the occurrence of credit balance in factory-overhead
account, resulting from excess of overhead applied to work-in-process inventory over the
amount of overhead actually incurred.
Over absorption occurs when the total overhead recovered or absorbed is greater than the
actual level of overheads for the period.