Types of Underwriting :
An underwriting agreement may be of any one of the following types:
Complete Underwriting
If the whole of the issue of shares or debentures of a company is underwritten, it is said to be complete underwriting.
In such a case, the whole of the issue of shares or debentures may be underwritten by –
(a) one firm or institution, agreeing to take the entire risk;
(b) a number of firms or institutions, each agreeing to take risk only to a limited extent.
Partial Underwriting
If only a part of the issue of shares or debentures of a company is underwritten, it is said to be partial underwriting. The part of the issue of shares or debentures may be underwritten by –
(a) One person or institution;
(b) A number of firms or institutions each agreeing to take risk only to a limited extent.
In case of partial underwriting, the company is treated as “Underwriter” for the remaining part of the issue.
Firm Underwriting
It refers to a definite commitment by the underwriter or underwriters to take up a specified number of shares or debentures of a company irrespective of the number of shares or debentures subscribed for by the public. In such a case, the underwriters are committed to take up the agreed number of shares or debentures in addition to unsubscribed shares or debentures, if any. Even if the issue is over-subscribed, the underwriters are liable to take up the agreed number of shares of debentures.