Share Application money pending allotment
This query is : Resolved
09 March 2011
What is the maximum time limit till which we can keep the share application money pending allotment?
09 March 2011
Not more than 180 days.
09 March 2011
Sir..This has been provided under the Master Circular issued by RBI on FDI but in case share application money has been received from Residents then is any time limit has been prescribed under the Companies Act, 1956 within which the share must be allotted?
09 March 2011
no time limit as per companies act or income tax act.
10 March 2011
Thanks for the d reply sir...but i m little confused as Section 205C(2) of the Companies Act, 1956 specifically provides that any application money recieved towards the securities of the Company and due for refund for more than 7 years shall stand transferred to "INVESTOR EDUCATION AND PROTECTION FUND". Is there any provision to get the refund on the merits of the case from such Fund??????
25 July 2025
Here's a detailed clarification on **share application money pending allotment and related timelines**, based on your query and the discussion you shared:
---
### 1. **Is there a maximum time limit under Companies Act 1956 / 2013 for allotment?**
* **Companies Act, 2013 (and earlier 1956 Act) does NOT prescribe any specific maximum time limit for allotment of shares after receipt of share application money** — except for the practical and procedural guidelines:
* **Section 39(4) of Companies Act 2013** says shares should be allotted within **60 days**, otherwise money must be refunded within the next 15 days.
* However, this provision is often not strictly enforced or may be treated differently in private companies.
* The **RBI Master Circular on FDI** mentions a maximum of **180 days** for allotment of shares when share application money is received from a foreign investor (FDI). This is an RBI regulation, not a Companies Act provision.
* For money received from **residents**, there is **no prescribed statutory time limit** for allotment under the Companies Act or Income Tax Act.
---
### 2. **What if share application money is pending refund for a very long time?**
* **Section 205C(2) of Companies Act, 1956** (now replaced by **Section 124 of Companies Act, 2013**) states:
> Any money (including application money) due to be refunded to investors which remains unpaid/unclaimed for **7 years** must be transferred by the company to the **Investor Education and Protection Fund (IEPF)**.
* This means if the share application money has not been refunded or allotted for more than 7 years, the company is legally required to transfer that money to IEPF.
---
### 3. **Can the applicant get refund from the IEPF?**
* Once the amount is transferred to IEPF, the claimant (applicant/investor) can apply to the **Authority prescribed under IEPF Rules** to claim a refund.
* The claimant must provide relevant documents to prove their claim.
---
### 4. **Summary**
| Issue | Details |
| ------------------------------------------------ | -------------------------------------------------------------------------------------------------------- |
| Max time limit for allotment under Companies Act | No strict statutory time limit, but 60 days allotment + 15 days refund guideline applies |
| RBI FDI regulation | Max 180 days for allotment after receipt of foreign investment application money |
| Transfer to IEPF | Unpaid/unclaimed refund money over 7 years must be transferred to Investor Education and Protection Fund |
| Refund from IEPF | Claimant can claim refund by applying to IEPF authority with proof |
---
### Practical Advice
* Companies should **try to allot shares or refund money promptly** (ideally within 75 days).
* Avoid keeping application money pending allotment/refund for years to prevent compliance issues and transfer to IEPF.
* Investors should **claim refund from the company early**; otherwise, after 7 years, they can approach IEPF.
---
If you want, I can help draft a letter for claiming refund from the company or guidance on filing with IEPF authority later. Would you like that?
---
### 1. **Is there a maximum time limit under Companies Act 1956 / 2013 for allotment?**
* **Companies Act, 2013 (and earlier 1956 Act) does NOT prescribe any specific maximum time limit for allotment of shares after receipt of share application money** — except for the practical and procedural guidelines:
* **Section 39(4) of Companies Act 2013** says shares should be allotted within **60 days**, otherwise money must be refunded within the next 15 days.
* However, this provision is often not strictly enforced or may be treated differently in private companies.
* The **RBI Master Circular on FDI** mentions a maximum of **180 days** for allotment of shares when share application money is received from a foreign investor (FDI). This is an RBI regulation, not a Companies Act provision.
* For money received from **residents**, there is **no prescribed statutory time limit** for allotment under the Companies Act or Income Tax Act.
---
### 2. **What if share application money is pending refund for a very long time?**
* **Section 205C(2) of Companies Act, 1956** (now replaced by **Section 124 of Companies Act, 2013**) states:
> Any money (including application money) due to be refunded to investors which remains unpaid/unclaimed for **7 years** must be transferred by the company to the **Investor Education and Protection Fund (IEPF)**.
* This means if the share application money has not been refunded or allotted for more than 7 years, the company is legally required to transfer that money to IEPF.
---
### 3. **Can the applicant get refund from the IEPF?**
* Once the amount is transferred to IEPF, the claimant (applicant/investor) can apply to the **Authority prescribed under IEPF Rules** to claim a refund.
* The claimant must provide relevant documents to prove their claim.
---
### 4. **Summary**
| Issue | Details |
| ------------------------------------------------ | -------------------------------------------------------------------------------------------------------- |
| Max time limit for allotment under Companies Act | No strict statutory time limit, but 60 days allotment + 15 days refund guideline applies |
| RBI FDI regulation | Max 180 days for allotment after receipt of foreign investment application money |
| Transfer to IEPF | Unpaid/unclaimed refund money over 7 years must be transferred to Investor Education and Protection Fund |
| Refund from IEPF | Claimant can claim refund by applying to IEPF authority with proof |
---
### Practical Advice
* Companies should **try to allot shares or refund money promptly** (ideally within 75 days).
* Avoid keeping application money pending allotment/refund for years to prevent compliance issues and transfer to IEPF.
* Investors should **claim refund from the company early**; otherwise, after 7 years, they can approach IEPF.
---
If you want, I can help draft a letter for claiming refund from the company or guidance on filing with IEPF authority later. Would you like that?
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