Dear All,
I would like to know whether the share application money received in the year 2010-11 can be converted into unsecured loans and interest can be charged @ 24% per annum. Can the company rules allow this as the unsecured loan can not be taken from ousiders except from directors.
The company does not get any right on the share application money until the allotment is made. Law requires these funds to be kept deposited in a separate bank account till the shares are allotted. Therefore, share application money cannot be considered as part of shareholders funds until the shares have been allotted. Such amounts are to be included under the head ‘Current liabilities' and so it cannot be converted into unsecured loan as it is a current liabiliity
If you convert application monies to UL, the restrictions imposed under Rule 2 of Companies (Acceptance of Deposit) Rules 1975 will be applicable, if it is a private ltd company.
Share application money cannot be converted into unsecured loan.
Share application money can be used for allotment otherwise it should be refunded.
It cannot be converted into unsecured loans.
Agreed with above answer,
Share Application Money can not be converted into unsecured loan, instead it is a current liability until shares are issued against it. Share application money should be deposited into bank a separate bank account until the allotment of shares or should be refunded.
CAclubindia
