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Share Application Money Pending Allotment

CA Final Student


Dear All

One of the Company(Non listed Public Company) has raised share application money as on 01.08.2008 and till now the shares has not been alloted to the applicants but the company uses that application money.

What are Consequences and applicable provisions for the above?

 
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Company Secretary and Compliance Officer

Hello,

 

As evident in case your company has accepted the Share Application Money you may do one simple thing. You may record the above transaction i.e. receipt of share application money and assurance given to proposed allottee in the board meeting minutes.

 

In other words simple noting of such receipt in the board minutes would be enough. No need to take any kind of approval from any concerned authorities.

 

Further collect the share application form from the proposed allottee for your record. You may download the sample share application from the link mentioned below:

 

http://www.caclubindia.com/share_files/files_display.asp?files_id=11908

Best Regards


Total thanks : 2 times

 
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Company Secretary and Compliance Officer

On the practical front this money is very much available to the company as nobody can trace this money. Reason being there is no such requirement to open some escrow account for the same application money.

Practically use of this money depends on the terms of subscriptttion agreement between the prospective investor and Issuer Company.

Regarding time limit to convert such share application money into capital the law is silent. However as per practice (specifically mention/mandatory requirement in FEMA regarding foreign money) allot share with 6 months of the receipt of application money.

 

Further there is no need to maintain share application money in a separate account.

 

Regards


Total thanks : 1 times

 
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CA Final Student


Thanks for ur Reply Sir...


Total thanks : 1 times

 
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Accountant


A company has received share application money (preference share capital reedemable after 3 years). The company has not issued the preference shares even after the expiry of 3 years and therefore the preference share capital has not been redeemed. The company is in losses and is not in a position to pay dividends. Please explain the consequenses. Please also suggest whether it is correct to continue to present it as share application money even after expiry of 3 years. Whether it is to presented as other liabilities.

 
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CMD of SHAYVIDZ Group


Originally posted by : Suresh
Dear All
One of the Company(Non listed Public Company) has raised share application money as on 01.08.2008 and till now the shares has not been alloted to the applicants but the company uses that application money.
What are Consequences and applicable provisions for the above?

 

Dear Suresh !

 

share application money cannot be utilised before completion of allotment proceeding..

 

My opinion is different..

 

U can read it in this forum

http://www.caclubindia.com/forum/share-application-money-72430.asp

 
Reply   
 
CMD of SHAYVIDZ Group


Originally posted by : gokul

A company has received share application money (preference share capital reedemable after 3 years). The company has not issued the preference shares even after the expiry of 3 years and therefore the preference share capital has not been redeemed. The company is in losses and is not in a position to pay dividends. Please explain the consequenses. Please also suggest whether it is correct to continue to present it as share application money even after expiry of 3 years. Whether it is to presented as other liabilities.

Dear Gokul,


such money is not a realised money for the company, i.e. this money is not legally available to the company before allotment.. Schedule VI of the companies act also says that this money (if allotment is pending) should be shown under current liabilities / other liabilities head.. so it is not the part of share capital..

As the allotment was not made then the question of payment of dividend doesn't arise.. however please check the AOA for giving interest on share application money received..


There is no time limit prescibed under Companies Act, 1956... only the word "WITHIN REASONABLE TIME" is used..


Please also note that :-

Indian Co-operative Navigation & Trading Co. Ltd. v Padamsey Premji (1934) 4 Comp Cas 110 (Bom)

An allotment should be made within a reasonable time and an applicant is not bound to accept an allotment after the lapse of a reasonable time. A delay of one year is unreasonable.



 
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Hey my query is on the same lines of the primary one. in case a promoter has infused money on application in the company but no allotment has been done in the case. in the agreement a period of 90 days was provided for allotment, but the condition was not met. I wish in case if the money is still in the company, under which head would such money come under in the balance sheet and whether can this money be called as a convertible loan for the company. Please provide your views upon this if any. 

 
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we have paid share application money to a public limited non listed company by 2005, till to date company had not issued the promised shares, at present by 2010 a new management had come in and they say that they are not liable to issue shares to me and that our payments to share application is time barred. What to do . Is it correct. wt is our way out legally ?

 
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Asst. Manegers


sir , in case of Share application money is paid to company outside India (Eg.USA) for a purpose of valuation date it is monitories / non- monitories item

 
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