Time limit for issue of Shares

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CA Ketan Jain (Querist)
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02 January 2010 There is a private limited company. It is subsidiary of foreign co. it has received share application money from its holding foreign company.
Now my query is what is the time limit for issuing share to the holding co.

Pawan Periwal

Pawan Periwal (Expert)
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02 January 2010 Dear Ketan

When ever foreign exchange involved in share application money, as per RBI guidelines it should be alloted with in 6 months otherwise the Forex should be refunded to the applicant however there is no specific provision and time limit in the companies Act 1956 regarding allotment of issued shares capital by a private company.

Regards
Pawan

CA Ketan Jain

CA Ketan Jain (Querist)
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04 January 2010 Dear Pawan

Thanks for your reply.

Could you give me the reference of that RBI Notification.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 When a private limited company receives share application money from its foreign holding company, the time limits for allotment and the associated compliance requirements are governed by both the Companies Act, 2013 and the Foreign Exchange Management Act (FEMA). Here's a detailed breakdown:

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### 🕒 **Time Limit for Allotment of Shares**

1. **Under the Companies Act, 2013**:

* **Private Placement**: As per Section 42(6) of the Companies Act, 2013, a company must allot securities within **60 days** from the date of receipt of the application money. If the allotment is not made within this period, the company is required to **refund the application money within the next 15 days**. Failure to do so results in the money being treated as a public deposit, attracting interest at 12% per annum from the expiry of the 60-day period. ([ENTERSLICE PRIVATE LIMITED][1])

2. **Under FEMA (Foreign Exchange Management Act)**:

* **Foreign Inward Remittance**: According to FEMA regulations, any share application money received from a non-resident (including foreign holding companies) must be allotted within **180 days** from the date of receipt. If the shares are not allotted within this period, the application money must be refunded. ([chhotacfo.com][2])

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### 📌 **Key Considerations**

* **Compliance with Both Acts**: While the Companies Act mandates allotment within 60 days, FEMA allows a longer period of 180 days. However, the stricter provision (60 days under the Companies Act) typically prevails to ensure compliance with both regulations.

* **Refund Mechanism**: If shares are not allotted within the stipulated time, the company must refund the application money. Under the Companies Act, this refund should be made within 15 days after the 60-day period.

* **Documentation**: Ensure that all transactions are well-documented, including the Foreign Inward Remittance Certificate (FIRC), board resolutions, and compliance certificates, to facilitate smooth regulatory reporting.([studylib.net][3])

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### ✅ **Recommended Action**

* **Allot Shares Promptly**: To comply with the Companies Act, allot the shares within 60 days of receiving the application money.

* **Refund if Necessary**: If allotment is not possible within the specified period, initiate the refund process promptly to avoid penalties.

* **Maintain Records**: Keep detailed records of all transactions and communications related to the share application and allotment process.

* **Consult Professionals**: Given the complexities involved, consider consulting a company secretary or legal professional to ensure full compliance with all applicable laws and regulations.

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