Share advance greater than Auth. capital

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Rajee (Querist)

30 September 2010 Can the share application money shown as share advance in the balance sheet exceed the authorized capital of the company?
Kindly clarify.

Ankur Garg

Ankur Garg (Expert)

30 September 2010 Hi,

As per my opinion receipt of share application money over and above of Authorised capital is not a default at all. Reason being share application money is not in the nature of paid up capital unless and until allotment of share against the share application money.

In other words only after allotment of share you can consider such share application money as paid up share capital. But before passing allotment resolution you have to increase your Authorised capital.

Making application to the company for allotment is just an offer pending acceptance from the company. Without acceptance the same would not be a binding contract for the company. Refer Indian Contract Act, 1872. Company reserves the right to reject the application and refund the share application money with or without interest as per the terms of acceptance of share application money.

Best Regards

Rajee

Rajee (Querist)

04 October 2010 Will this share application money attract revenue generation under IT Act? Kindly clarify

Ankur Garg

Ankur Garg (Expert)

05 October 2010 Well am not sure about the position in Income Tax Act. Kindly post this one IT expert section.

Thanx

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