Investment

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2013 If a private limited company has a authorized capital of 110000(11000@10), Paid up capital of 100000.It issues balance 10000 to the investor who wants to invest in the company.But the investor is ready to invest 10000000.
1) Can the company issue balance 10000(1000@10) capital to foreign investor and take rest of the money as security premium?
2)Is there any complication under income tax act which has to be followed?
3)Procedure under companies Act to be followed?

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

31 December 2013 1. can it be issued at premium, yes.

2. to issue to foreign investor, you need to comply with FEMA guidelines.

3. If share is priced higher then fair value arrived as per income tax rule 11U and 11UA, such excess shall be taxed as income from other sources in the hand of the company.

4. Companies act: section 78 deals with utilization of premium. Procedure for issue of shares at permium:

- call a board meeting for such issue and issue notice of general meeting to the shareholders.

- give notice to shareholders for the meeting stating the agenda for issue of shares at premium

- pass special resolution under section 81(1A)

- File Form 23 within 30 days of resolution

- call a board meeting for allotment of shares

- File Form 2 with ROC within 30 days of allotment

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2013 But Sec 56 of income tax act applies only in case where investor is resident..???

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2013 And moreover Sec 81 does not apply to Private company!!

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

31 December 2013 yes. my mistake. yes. section 56 wont apply. rest of the compliances as mentioned above will apply.

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

31 December 2013 well with respect to section 81, the answer was in respect to new companies act Section 62 which is applicable to both private as well as public companies.

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2013 Sec 62 has not been notified yet!!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok