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CS Surbhi Bansal (Self Employed) (131 Points)

31 March 2011

Please Inform me about the consiquences of

share application money is accepted beyond the authorised capital.

what are the penal provision can imposed on private limited company if they do that??

regards

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9 Replies

Shridhi Jain (Company Secretary) (1678 Points)
Replied 31 March 2011

I think you should refund the excess application money.

In a private co., it is already known to whom will the shares be alloted and how much shares per person. will be alloted. There should not be a question of receiving excess application money.

1 Like

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 31 March 2011

Originally posted by : CS Surbhi Bansal
	Please Inform me about the consiquences of share application money is accepted beyond the authorised capital. what are the penal provision can imposed on private limited company if they do that?? regards

Hi Surabhi

In my opinion, there is no penal provisions if a pvt company receives application money beyond Authorised

Share Capital. But the money received has to be only from among members or relatives of members, directors

as per provisions of 3(1)(iii) (d).

Also Rule 2(b)(ix) of Companys ( Acceptance of Deposit) Rules 1975 states

"any amount received from the person who at the time of receipt of the amount was a director or a shareholder of

the private company, then such amount will not be treated as deposit within the meaning of deposit rules.".

You need to ensure the money received extra as application money for authorised share capital is not out of any

borrowing or borrowed funds.

So get a letter or declaration from the person concerned in favour of company that the amount given out is not

from the borrowed funds or funds accepted by others.

Record the excess application money exceeding ASC (Authorised), in minutes and take note of the same in the Board meeting.

Update the register for excess share application money.

The application money excess received can be used as Paid up Share Capital (PSC), only on allotment.

Experts please advice if i have missed out on any aspect.

regards

Santosh Shah

1 Like

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 31 March 2011

Originally posted by : CS Surbhi Bansal
	Please Inform me about the consiquences of share application money is accepted beyond the authorised capital. what are the penal provision can imposed on private limited company if they do that?? regards

Similar Situation

Please refer this link

/forum/use-of-share-application-money-by-private-limited-company-9502.asp

regards

Santosh Shah

Shridhi Jain (Company Secretary) (1678 Points)
Replied 31 March 2011

Santosh is right but generally in pvt. co. total value of shares are received in lumpsum in application money...

Then how to treat that money...? I think it can be treated as "Unsecured loan".

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 31 March 2011

Originally posted by : Shridhi Jain
	Santosh is right but generally in pvt. co. total value of shares are received in lumpsum in application money... Then how to treat that money...? I think it can be treated as "Unsecured loan".

Hi Shridhi

In my view, I dont think it can be treated as " Unsecured Loan".

If its excess application money, that needs to fall under the head Share application money

under head " Share Capital" of B/S. Moreover we are recording the money received in Share application register.

Its Pvt Ltd Co. Treating as unsecured loan may attract the provisions of Section 58A/AA as

" Accepting Deposits".

Experts Please advice. My view may be wrong too.

regards

Santosh Shah

CS Surbhi Bansal (Self Employed) (131 Points)
Replied 31 March 2011

thankyou Santosh & Shridhi for giving your valuable time

and for your reply regarding my problem

GURMUKH (CS) (81 Points)
Replied 01 April 2011

in the past share application was used to be shown under the heading share capital. now a trend is being followed under which share application money is being shown undr head current liabilities because it can be asked to be returned by applicant if allotment has not been made

CA Saiyum khan (Practicing CA) (685 Points)
Replied 01 April 2011

Originally posted by : GURMUKH
	in the past share application was used to be shown under the heading share capital. now a trend is being followed under which share application money is being shown undr head current liabilities because it can be asked to be returned by applicant if allotment has not been made

As per revised schedule VI applicable effective from 01-4-11. Share application money has to be shown as a separate line item under share holders fund.

Jyotika (study study n study) (147 Points)
Replied 01 April 2011

Hi All,

Please tell for how many days we can keep share application money without making allotment in case of ltd and pvt ltd. both. Plus can we repay it with interest without any days limit

thanks

csjyotika