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Calls in advance

anushree nadagouda (4 Points)

30 July 2018

Why is calls in advance not part of paid up share capital? And as per which provision?

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CA Naveen Chand (Chartered Accountant) (12739 Points)
Replied 30 July 2018

Calls in advance is adjusted in future at the time of relevant call

Aman shaw (4 Points)
Replied 30 July 2018

paid up share capital are those capital which was called by the company and deposited by shareholders

anushree nadagouda (4 Points)
Replied 30 July 2018

What provision under the Act or rules state that calls in advance should not be considered in paid up capital

CA Naveen Chand (Chartered Accountant) (12739 Points)
Replied 30 July 2018

Payment of calls in advance: But before we conclude our discussion on calls we have also to know how payment in advance of calls is treated by a company. A company may, if so authorised by the articles, accept from any member the whole or a part of the amount remaining unpaid of any shares by him although no part of that amount has been called up [Section 50, the Companies Act, 2013]. The amount so received or accepted is described as payment in advance of calls. When a company receives payment in advance of calls, the consequences will be as follows:

(i) The shareholder is not entitled to voting rights in respect of the moneys so paid by him until the same would, but for such payment, become presently payable [Section 50)].

(ii) The shareholder’s liability to the company in respect of the call for which the amount is paid is extinguished.

(iii) The shareholder is entitled to claim interest on the amount of the call to the extent payable according to articles of association. If there are no profits, it must be paid out of capital, because shareholder becomes the creditor of the company in respect of this amount.

(iv) The amount received in advance of calls is not refundable.

(v) In the event of winding up the shareholder ranks after the creditors, but must be paid his amount with interest, if any before the other shareholders are paid off.

(vi) The power to receive the payment in advance of calls must be exercised in the general interest and for the benefit of the company (Syke’s case (1872))

it is laibility in the hands of company and not the part of Share Capital

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