Use of share application money

Save Share

This query is : Resolved

Jigar Dhabalia (Querist)

09 May 2014 Dear Sir

can a private ltd company use share application money received,if allotment is not made within prescribed time limit of 60 days ??

please inform as per new companies Act 2013.

Jigar Dhabalia

Jigar Dhabalia (Querist)

10 May 2014 dear experts please provide an solution
thanks

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

02 August 2025 Under **Companies Act, 2013**, the treatment of **Share Application Money (SAM)** received by a Private Limited Company before allotment of shares is governed by certain provisions:

---

### Key Points on Use of Share Application Money:

1. **Time frame for allotment**
As per **Section 39(4)** of Companies Act, 2013, the company **must allot shares within 60 days** from the date of receipt of the application money.

2. **If shares are not allotted within 60 days**

* The company is **required to refund the application money within 15 days** from the expiry of 60 days.
* Failure to refund in time attracts **interest @ 12% p.a.** to be paid by the company for the delay in refund.

3. **Use of Share Application Money before allotment**

* Since allotment has not been made, the SAM is **liability** of the company to refund if allotment does not happen within prescribed time.
* Therefore, **the company should not use the SAM for any other purpose**, as it is technically not a part of the company’s paid-up capital yet.
* Using SAM without allotment within the time limit can lead to legal consequences including liability for refund with interest.

4. **After allotment**
Once shares are allotted, the application money becomes part of the company’s share capital and can be used for company purposes.

---

### Summary Table

| Situation | Permissible use of SAM | Remarks |
| --------------------------------- | ----------------------------------------------------- | ---------------------------------------------------------------------- |
| Before allotment & within 60 days | Not specifically restricted, but safest to keep aside | Await allotment, avoid using for other purposes to avoid complications |
| Not allotted after 60 days | Must refund application money + interest | Using SAM is not allowed; refund liability arises |
| After allotment | Becomes part of share capital, can be used | No restriction post allotment |

---

### Relevant Sections:

* **Section 39(4), Companies Act 2013**: Time frame for allotment & refund of application money.
* **Section 2(68)**: Definition of share capital.

---

### Practical Advice:

* Do **not use** share application money before allotment.
* If allotment is delayed, refund money promptly with interest.
* Ensure timely allotment within 60 days to avoid penalties.

---

If you want, I can provide sample letters for refund or procedural guidance on allotment compliance. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now