When shares are over-subscribed, directors may decide to scale down the number of shareholding by alloting shares at ___
Answer Details
When shares are over-subscribed, directors may decide to scale down the number of shareholding by allotting shares at pro rata. This means that the available shares are distributed among the applicants in proportion to the number of shares they have applied for.
For example, if a company issues 1,000 shares and the demand is for 1,500 shares, each applicant will receive a percentage of the shares they applied for based on the total available. This method ensures fairness as it maintains the same ratio of allocation relative to each investor's demand.
Allotting at pro rata ensures that all investors get an opportunity to receive a share, albeit a reduced amount than initially requested, in proportion to their original application. This approach helps to manage the allocation efficiently and maintains balance among potential shareholders.