Share Application Money - excess of Authorised Share capital

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Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2009 In case of Pvt Ltd. Company, if share application money is received in excess of authorised share capital, can it be shown as share application money below share capital and above Reserves &Surplus? or it should appear as current liabilites/ unsecured loans depending upon whether the amount will be refunded or captitalised after enhancement of authorised share capital.

Ankur Garg

Ankur Garg (Expert)
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23 November 2009 Hi,

As is evident that the Company has accepted the Share Application Money beyond AC so it should be appear as current liabilities also 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.
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.

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

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