Treatment of share application money

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2016 Dear Sir,

Please help with the following, One of my client, a Private limited company has share application money pending before the commencement of Companies Act 2013.

Now, my query is what is treatment we can give. Either to go with the provision of Deposit or to make Alootment of share.

Please Suggest.

Querist : Anonymous

Querist : Anonymous (Querist)

17 June 2016 Please Suggest me the best solution to my query.

Thanks in Advance.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Regarding **treatment of Share Application Money (SAM)** pending before Companies Act, 2013, here’s a clear view:

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### 1. **Understanding Share Application Money (SAM)**

* SAM is the money received by a company from applicants who have applied for shares but shares are not yet allotted.
* Under **Companies Act, 1956**, SAM was treated more loosely, but with Companies Act, 2013, stricter rules apply.

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### 2. **Treatment Under Companies Act, 2013**

* **Section 39(1)** of Companies Act, 2013 says the company **must allot shares within 60 days** of receiving application money.
* If shares are **not allotted within 60 days**, the SAM amount must be **refunded within 15 days** from expiry of 60 days.
* If the company fails to refund, then SAM **will be treated as deposits** and will attract provisions under **Chapter V (Deposits)** of the Act.

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### 3. **Your Situation: SAM pending before commencement of Companies Act, 2013**

* Since the amount was received **before commencement of Companies Act, 2013**, but the Act is now in force, the **new Act’s provisions apply** going forward.
* The company **cannot keep the SAM indefinitely** without allotment or refund.
* **Options for the company:**

a. **Allot Shares:**

* Complete the allotment of shares against SAM immediately.
* Record this properly in the books and issue share certificates.

b. **Refund SAM:**

* If the company does not want to allot shares, refund the SAM immediately.
* If refund is delayed beyond 60 days, treat as deposit and comply with deposit regulations.

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### 4. **Accounting Treatment**

* Until allotment, SAM is shown as **Liability (Share Application Money pending allotment)** in the Balance Sheet under **‘Current Liabilities’ or ‘Other Liabilities’**.
* After allotment, transfer the amount to **Share Capital and Securities Premium** accounts as applicable.
* If treated as deposit, comply with disclosure and regulatory requirements under deposit rules.

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### 5. **Best Course of Action**

* **Allot shares ASAP** to avoid classification as deposit.
* If allotment is not intended, **refund the money** immediately.
* If refund is delayed, prepare for compliance with deposit provisions, including filing necessary returns and disclosures.

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### Summary:

| Scenario | Treatment |
| -------------------------------------------- | ------------------------------------------- |
| Shares allotted within 60 days | Debit Bank, Credit Share Capital |
| Shares not allotted and money held > 60 days | Treat as Deposit, comply with Deposit Rules |
| Refund not made within 60 days | Deposit regulations apply |

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If you want, I can help draft the **journal entries** or **compliance checklist** for your client. Would you like that?

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