Share Application Money

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 April 2010 One my client has received share application money so what are the formalities it has to fulfill? I want to know formalities required to fulfilled by both the parties applicant as well as allotter.

Rasesh

Rasesh (Expert)

23 April 2010 The applicant should have filled in the application form for the shares. The allotter should have issued such form with all the conditions prescribed therein. If there is going to be a substantial time gap between the receipt of money and allotment, then take a noting in the Board for receipt of such share application money.

Ankur Garg

Ankur Garg (Expert)

23 April 2010 Hello,

In case your 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.
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

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

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