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Allotment of shares

prakash (Company Secretary) (1352 Points)

13 September 2014

Share Application money is lying from long time in accounts of private limited company, now company is proposing to allot shares to subscribers, can it allot shares by passing board resolution with out following section 42 and 62(1) (c) of the Companies Act, 2013, since amount is already received by company, there is no point in issuing offer letter and opening separate bank account., does it amount to voilation of Act.

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2 Replies

RoHaN k (CA & CS) (308 Points)
Replied 13 September 2014

Sir as per my openion,

Your share Application money was received before 1st April 14, Under Comapnies Act 1956,

Now Under Comapnies Act 2013, you only have to comply regarding PAS-3,

Section 42 & 62(1)(c) to be deal with fresh issue of offer only, after 1st April 2014.

So your point is right , no need to issue offer letters and it will not be a violation of any provisions.

If any member have any different view please share.

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 15 September 2014

Typically, allotment of shares involves 3 main steps:

1. Issue of shares by Board ('Invitation to offer') by Prospectus or Letter of Offer etc.

2. Application by the applicant with application money ('Offer')

3. Allotment by the Board ('Acceptance of offer')

If the company has received share application money, it means first two steps are already over. Only Board resolution for allotment is to be passed. There is no question of issuing offer letter again.