Conversion of share application money into unsecured loan

No the share application money  cannot be uphold indefinitely, allotment should have been made.The should not be any application money standing in the Balance Sheet at the time of finalisation.

Refund of share application money should be within one month of the completion of the procedure of allotment.

Only private company can accept unsecured loan from members

Mr. Parashar, Pls clarify under which provision or section share application money cannot be uphold indefinitely and share application money can not stand in the Balance Sheet at the time of finalisation. Also please mention section under which refund of share application money should be made within one month of the completion of the procedure of allotment.

Ms Trivedi, According to me, it is not necessary to allot shares against application money received for public company. However you can not convert share application money into unsecured loan. Best practice would be to refund share application money to the persons and then accept unsecured loan from them. Pls correct me if I am wrong. I request esteemed members to pls share their views and knowledge. Thanks!

Dear All,

So far as companies Act is concerned, the Act is silent regading time limit for allotment of Shares. Since we are unlisted public Company, listing compliances are not applicable.

In further to my query, i would like to share the following more details regading the matter:

1) The share application amount has been received from a Director of the Company who is NRI

2) The Share applicaiton amount was received on August, 2010.

3) Among these 7500 shares have been alloted to NRI DIrector. However still we are having pending share applicaiton money amounting to Rs. 4,50,000/- which have not been refunded till date.

Since the share application money has been received from NRI Director, FEMA guidelines will come into the picture and as per FEMA & FDI policy, the Shares have to be alloted within 180 days from date of inward remittance. If shares are not alloted within 180 days then forthwith it is required to be refunded.

Now the fact is that-

Due to negligence on the part of the Company,

1) the Company has not intimated to RBI alogwith FIRC of Inward remittance received from NRI Director.

2) Since 7500 shares have been alloted to NRI DIrector, the Form FC-GPR is required to filed within 30 days of allotment which is not filed at all.

Now suppose we refund these amount now then obviously AD-RBI will ask the purpose of Remittance. Since the purpose of remittance is refund of share application money then again the question will come why the Company has not alloted shares within 180 days of Receipt of Inward Remittance and why the co has still retained the share application money??

so can u please guide me how to refund such amount when above referred non compliances are there in a Company??

Thanks & Regards

Zankhana

 

Zankhana Ji, You can now apply to RBI and file papers for receipt of foreign remittance and form FCGPR for allotment of shares. In one of my case I have filed papers late with RBI alongwith reasons of delay for condonation of delay. They have accepted the same. According to me you should not straight forward refund the amount since you have alloted shares for certain amount and balance is lying in share appl money. In case you have to refund the whole amount without allotment, you can refund the whole amount and do not intimate to RBI. In case they catch you for the default, at that time you can plead ignorance of law and assure to file forms now. Thanks Neha

Thanks Neha. Thanks a lot for your kind guidance.

This is the first time i am handling such case and during the period of these transactions there was no CS in the Company and i have recently joined. Earlier i have filed Form FC-GPR and other forms as required under FEMA but that was within time period.

Dear Neha,

if we file the required forms now then for Condonation of delay, we have to file the seperate application for it or we can just mention the reason in the forwarding letter which we generally prepare at the time of submission of FC-GPR.

if Possible can u guide me what could be the proper reason for such condonation.

 

 

 

You just have to mention the reason in the forwarding letter which we prepare at the time of submission of FC-GPR.

Zankhana Ji, Pls give me your email id : I will send you the draft of condonation. Regards.

Thanks Dear.

Please note my E-mail ID: cszankhana @ gmail.com ; zsjoshi_2006 @ yahoo.co.in

 

I have mailed you. Pls check.

Dear Neha,

By filing the required forms now, we can make the defult good. But what about the refund. As refund is after a period of lapse of almost 6 to 7 month.

Can you please guide me for the procedure to be followed for such refund. likewise can we mention the reason for condonation of delay for not refunding within a time period and can refund?

Dear Neha,

I have received ur mail. Thanks.

Regards.

 

You can mention the reason for condonation of delay for not refunding within a time period and forthwith approval of RBI you can refund.

You are absolutely right.

again thank a lot..

Bye...