Share Application pending allottment

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CA. Shiburaj K (Querist)
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14 November 2009 Hi all
What is the treatment of share application money received in advance pending allottment, whether it will be included in subscribed share capital while preparing Schedule V?

Ankur Garg

Ankur Garg (Expert)
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14 November 2009 Hi,

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.

Best Regards

Ankur Garg

Ankur Garg (Expert)
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14 November 2009 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

CA. Shiburaj K

CA. Shiburaj K (Querist)
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14 November 2009 Thank u for yor reply sir But my query is regarding how to show the advance share application in the Schedule:V, Whether it will be included in the Issued, Subscribed share capital as the application money and value of share is the same.

Ankur Garg

Ankur Garg (Expert)
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14 November 2009 Share application money pending allotment is of the nature of a current liability and should, therefore, be disclosed as such. Share application money pending allotment should hence be disclosed as a current liability and not as a part of share capital.

Share application money is neither a part of share capital nor capital employed because it is only application money and is not share capital. It becomes share capital only on allotment.
Law requires that the share application money be deposited in a separate bank account till such time the allotment is made. Therefore, the company cannot employ it in generating its income.

CA. Shiburaj K

CA. Shiburaj K (Querist)
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14 November 2009 Thank you sir

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