share application money

This query is : Resolved

CA Kanwaljeet (Querist)
Follow

16 March 2010 dear expert,
during the audit i found that the pvt. ltd. company received share application money amount of rs.40 lacs, so i want to know about that what should i check regarding this,,,, pls help me

thanks,

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
Follow

16 March 2010 You should ask for the share applications in this regard which is a primary supportive document to be verified by an auditor.

Ankur Garg

Ankur Garg (Expert)
Follow

16 March 2010 Hello,

In case any company has accepted the Share Application Money the same should be recorded 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.

Further the share application form from the proposed allottee should be collected for the 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

Ankur Garg

Ankur Garg (Expert)
Follow

16 March 2010 On the practical front this money is very much available to the company as nobody can trace this money. Reason being there is no such requirement to open some escrow account for the same application money.

Practically use of this money depends on the terms of subscripttion agreement between the prospective investor and issuer company.

Regarding time limit to convert such share application money into capital the law is silent. However as per practice (specifically mention/mandatory requirement in FEMA regarding foreign money) allot share with 6 months of the receipt of application money.

Further there is no need to maintain share application money in a separate account.

Regards

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