Reservation on a competitive basis limits allocations for employees and shareholders, controls spill-overs and restricts reapplications. Regulation 254 allows issuers to reserve securities on a competitive basis for employees and certain shareholders, excluding promoters; reservations exclude allocations to lead managers, registrars, syndicate members and their related persons. Employee reservations are capped by an aggregate percentage of post-issue capital with individual allotment limits and a limited proportional remedy for under-subscription; shareholder reservations are capped by a percentage of the issue size. Reservations prevent further net-offer applications by most beneficiaries, permit inter-category reallocation of unsubscribed portions, and allow spill-over to the net public offer where the net offer is under-subscribed.