|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.
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.