What is Underwriting of Shares

Underwriting of Shares means the contract in which underwriter agrees to take shares which will not be subscribed by public. For getting fast minimum subscription from public of his issued shares, company has to do this type of contract. With this, headache of selling and getting minimum subscription will be of underwriter not company. For this, company gives underwriting commission to underwriter which is controlled by SEBI. Still  5% on issue of shares or actual rate which is agreed in article of association which is less, is accepted to give it to underwriter.