Advance Share Capital treatment

Shweta (Service) (68 Points)

23 February 2008

Advance Share capital money is recieved from promoters. Whether in Companies Act, 1956, there is any restriction for issue of shares. How long company can keep this advance share money?

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8 Replies

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 23 February 2008

You need to give the following clarifications: 1. Is the company public or private 2. If public is it to be listed or unlisted

Shweta (Service) (68 Points)
Replied 23 February 2008

Thanx 4 reply. i am doing secretarial audit. This issue has come across several companies. But none is listed company. I mean advance share capital treatment is public (unlisted) & private limited companies.

CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 24 February 2008

The issue of shares by the compnay is limited to the authorised share capital of the company. The additional money received can be shown under the head "Share application money pending allotment" until the shares are issued.

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 24 February 2008

If it is unlisted company or private limited company, the allotment is governed by the terms in offer document conncted with private placement. If there are no such terms then general law of contract will be applicable. That is before the money received as advance is utilised, allotment will have to be made.

(Guest)

Advance share application money recd. is shown as "Share application money pending allotment" on the face of B/S (in some books it is suggested to show such amount under current liabilities head...... however in some recent big balance sheet I have seen the first treatment)..... i think there is no time limit for allotment of shares under private placement .... i.e. share application money can stand in books for ,say, years

(Guest)

Is joint venture's(is a Pvt Co.,) Service Tax Credit can be availed by the holding company.

Kaushal Kumar Ojha (MANAGER) (41 Points)
Replied 20 September 2009

Whether in Private limited co., Share application money can be kept for more than 2-3 years. if yes under what head it is to be treated either networth or Unsecured loan.