SHARE APPLICATION MONEY

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Dinesh Malik (Querist)

14 December 2009 A Public Ltd. Company taken a loan of Rs. 50 lacs on 31.03.2007 from a Pvt. Ltd. Company. On 31.03.2008, loan amount converted as share application money.

So, the money is shown as 'Share Application Money' since 31.03.2008 and not utilized yet.
My question is:

1. How long the money can be held by the Public Company?
2. Can the money be refunded without allotment of shares?
3. Can the money be utilized without allotment by Public Co.?
4. Can Pvt. Co. show it as an investment?

I look forward your cooperation.

Ankur Garg

Ankur Garg (Expert)

14 December 2009 1. Regarding time limit to convert such share application money into capital the law is silent. However as per practice allot share with 6 months of the receipt of application money.

2. YES but with normal interest. (for safety sake)

3. No

4. Investment in what??

Ankur Garg

Ankur Garg (Expert)

14 December 2009 As is evident that the 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.

Regarding time limit to convert such share application money into capital the law is silent. However as per practice allot share with 6 months of the receipt of application money.

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:

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

Regards

Dinesh Malik

Dinesh Malik (Querist)

14 December 2009 Thank you so much Sir.

But under what heading the Pvt. Ltd Co. will show the amount deposited with Public Company as share application money.
I think it should show under "Investments".

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