14 November 2011
There is no need to formally allot any shares to the subscribers. They are deemed shareholders of the company by virtue of the declaration given in MOA and AOA.
Date of incorporation should be taken as date of deemed allotment and may be printed on the share certificates.
In the first balance sheet subscription money should be reflected as received from the subscribers. So there is no fixed date by which they should pay their subscription money.
26 July 2025
Great question! Here's a detailed explanation regarding subscribers to the MOA, allotment, payment timelines, and related penalties for a Private Limited Company:
1. Subscribers to Memorandum & Allotment of Shares Subscribers to the MOA are the initial shareholders who agree to take shares in the company at incorporation. As per Section 2(68) of the Companies Act, 2013, these subscribers are deemed to have been allotted shares on the date of incorporation. No separate allotment resolution or process is needed for them. 2. Time Limit for Payment of Subscription Money The Act does not prescribe a strict time limit for payment of subscription money by subscribers. The subscription money is payable as per the MOA or agreement between the company and subscribers. Practically, the money should be paid before or at the time of incorporation, but delays are common. 3. Treatment in Financial Statements If the subscription money is not received before the first balance sheet date, it should be shown as "Calls in arrears" or "Share Application Money Pending Allotment" in the Balance Sheet under shareholder’s funds or loans and advances as applicable. It reflects a receivable from the subscribers. 4. Penalty for Non-Payment Under Section 73 and 74 of the Companies Act, 2013 (relating to deposits), the unpaid share subscription money can be considered a kind of deposit if not received on time. But generally, no direct penalty for delay in payment of share subscription money by subscribers unless prescribed in MOA/contract or if the money is considered deposit. If shares are allotted and payment is not made, the company may forfeit shares as per Section 56 of the Act. The company can also file a complaint under Section 447 (fraud) if subscription money is intentionally withheld, but this is rare. 5. Relevant Sections Section Topic 2(68) Definition of allotment of shares 42 Private placement rules (if applicable) 56 Forfeiture of shares for non-payment 73, 74 Acceptance of deposits (subscription money may be considered as deposits if conditions met) 129 Financial statements disclosures Summary: Issue Position Payment timeline for subscribers No fixed legal deadline, but payment should be timely Penalty for non-payment No direct penalty unless shares are forfeited or money treated as deposit Financial statement treatment Show unpaid amount as arrears or share money receivable Shares deemed allotted On date of incorporation Practical Advice: Encourage subscribers to pay subscription money ASAP to avoid complications. Reflect unpaid amounts properly in the balance sheet. If payment delay is substantial, consider forfeiture procedure under Section 56. Ensure MOA and subscription agreements clearly specify payment terms and consequences.
CAclubindia
