Question

State the following statement is True or False:

A person who gives guarantee of raising minimum subscription is an underwriter.

• A. true
• B. false

Answer 1

True, underwriting is an act of guarantee by an organisation or an individual for the sale of certain minimum amount of shares and debentures issued by a public limited company . Underwriting acts as a guarantee against danger of not receiving minimum subscription . In absence of underwriting agreement , there will always be uncertainty of subscription of shares . The guarantee of the underwriters removes the uncertainity.