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Non Subscription of Shares

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This query is : Resolved

CA B.S.Sridhar (Querist)

10 May 2008 Dear Members ,

i have a query regarding initial subscription of shares.

In the MOA/AOA , the promoters of a newly incorporated company undertakes to subscribe for certain number of shares. What happens if they do not subscribe for those shares???

Is those shares can be allotted to others??

for example , promoter 1 & promoter 2 each undertake to take 5000 shares of Rs. 10 each in a company.

can Promoter 1 & 2 take only 500 shares each and can the other shares be given to others??

i request the learned members to clarify the same

thanks in advance

- Sridhar

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

12 May 2008 Once a promoter subscribes to memmorandum and Articles of Association agreeing to take so many number of shares, on registration of the company they become shareholders equivalent to that many numbers of shares. The money due on shares is a recoverable debt.If they do not pay money thereon, the only remedy is forfeiture if provisions to that effect is in Articles. If not the only alternative is money suit for recovery of debt.

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