Subscriber to share application money

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Alok (Querist)
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11 January 2011 Hi,
Can the subscriber of share application money be counted as the shareholder in the pvt ltd company.

Thanks
Alok

Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 January 2011 NO he will not be counted.

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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12 January 2011 No it shown as loan and advances (liability side of B/s)

Jayashree S Iyer

Jayashree S Iyer (Expert)
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12 January 2011 Only on allotment an applicant becomes a shareholder / member of the company.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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12 January 2011 Dear Manmohan
How can loan & advances be shown on libility side whereas it is shown under current assets.

it will be shown under head share application as a part of shareholders funds between share capital & reserves.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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12 January 2011 Disagree with Manmohan.
Share Application Money will be shown in liabilities side under separate head--
Share Application Money.
And the applicant will be counted as shareholder only after allotment.

CA Sanat Pyne

CA Sanat Pyne (Expert)
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12 January 2011 The correct accounting treatment in respect of share application money is analysed as below:
Section 211 of the Companies Act, 1956 provides that the balance sheet of a company shall give a true and fair view of the state of affairs of the company and shall be in the form (either horizontal or vertical) as set out in Part I of Schedule VI. · The broad heads under "Liabilities" therein are (i) Share Capital, (ii) Reserves and Surplus, (iii) Secured Loans, (iv) Unsecured Loans and (v) Current Liabilities and Provisions. The item of 'share application money' does not appear in the subheads under any of these heads. · Any subscription received by a company against issue of share capital can be regarded as "subscribed share capital" only when the share capital is actually subscribed and allotted as well. Until the allotment is made, any subscription cannot be included in the amount of subscribed share capital. [ICAI Compendium of Opinions, Vol. XII, pp. 121 to 123]. Share application money, therefore, cannot be treated as 'Share Capital". · Share application money only in respect of invalid or revoked applications and excess application money received due to over-subscripttion, however, may be treated as "Current Liabilities". The instant case does not satisfy any of the above, hence cannot be treated as "Current Liabilities" Share application money, therefore, can neither be categorized as "Share Capital' nor "Current Liabilities". · The ICAI Compendium of Opinions, [Vol. XV, (1996 Edn.) pp. 34 to 36], opines that the "share application money pending allotment" should be shown in the balance-sheet under a separate heading between "Share Capital" and "Reserves and Surplus". · Share application money is also not an instrument, much less an Equity linked instrument.

Jayashree S Iyer

Jayashree S Iyer (Expert)
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12 January 2011 Good, logical intrepretation. I wss under the impression that it would be treated an advance.

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