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Issue of Share Certificate to Subscribers

Muralidharan (Self Employed) (1034 Points)

08 August 2009

Dear Members

A private limited company was incorporated on 11.12.2007. Subscribers to MOA had taken 5,000 shares each of Rs.10/- each totalling to Rs.1.00 lac. Both the Subscribers had not brought in their money immediately. The same was received only during September 2008. Kindly advise whether the company can issue share certificate to its subscribers in the first board meeting without receipt of the subscripttion amount at that time.

Some of my friends had advised that issue of share certificate to the subscribers without receipt of money would be a violation.

I look forward for a detailed reply in this regard from valued forum members

with regards

Muralidharan

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20 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 08 August 2009

Hi Murali,

Observe carefully

Subscribers of MOA are deemed shareholders of the company. They don't need to take shares. As soon as they subscribe the MOA & file it with ROC along with other incorporation documents they become the members as well as shareholders of the company. Appreciate further have you ever filed form-2 for the subscribers? The answer would be No. That itself is a kind of proof that no allotment is required to be made to the subscribers. Further your view that So if any of the subscribers do not want to take shares is practically impossible.

Form-2 is not required to be filed for subscribers hence no formal allotment is required in case of subscribers. They are deemed members and shareholders of the Company.

Regarding receipt of payment from subscribers I would say ideally such amount should be deposited by the subscribers after incorporation of the co. in the newly opened bank a/c of the company and record the same in the first BM Minutes.

Alternatively, as there is no tracing (as far as ROC is concerned) of such amount, it may be deposited by them later. As a CS i would suggested you should opt I option to avoid any kind of future problem.

DATE OF ALLOTMENT TO SUBSCRIBERS AND DATE TO BE MENTIONED ON SHARE CERTIFICATE

Date of allotment to subscribers will be the date of incorporation of the company and the same date will also be used for printing on share certificate to be issued to subscribers.

Practically & legally this is very much possible. To conclude you may use Date of Incorporation of the company for the purpose of:

1. Printing on share certificate of subscribers

2. as date of Allotment to subscribers

3. For the purpose of filling the column in register of member to enter the name of subscribers.

Even if you receive the amount from subscribers after 6 months the date of deemed Allotment and date on share certificate would remain the same i.e. date of incorporation of the company.

Hence, view taken by various members that they become shareholders only when they pay for the shares and shares are allotted to them is incorrect in my opinion & as per the discussion above.

In case of any doubt please post it. I’ll definitely try my best to solve it.

Best Regards

1 Like

Khushboo Maheshwari (Company Secretary) (548 Points)
Replied 10 August 2009

But Ankur Sir is this not voilation of certain sections which says that share certificates should be issued within three months of the date of allotment.

Further cant we pass a resolution in the First Board meeting taking note of subscribers and further stating that the share certificates will be issued as and when the money is received from the subscribers

Khushboo Maheshwari (Company Secretary) (548 Points)
Replied 10 August 2009

But Ankur Sir is this not voilation of certain sections which says that share certificates should be issued within three months of the date of allotment.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 10 August 2009

Dear Khushboo,

As mentioned in my earlier reply Form-2 is not required to be filed for subscribers hence no formal allotment is required in case of subscribers. Since no formal allotment is involved hence Section-113 is not applicable.

BOARD MINUTES

Yes passing a resolution in the First Board meeting taking note of subscribers would be enough. But noting to the effect that the share certificates will be issued as and when the money is received from the subscribers would be risky and not advisable.

Please find attach a sample resolution for taking note of subscribers.

Best Regards

Attached File : 53 minutes extracts.doc downloaded: 907 times

Khushboo Maheshwari (Company Secretary) (548 Points)
Replied 12 August 2009

Thanks

CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 06 September 2009

Dear Ankur,

The private limited company, in the present case, was incorporated on 11.12.2007. Subscribers to MOA had taken 5,000 shares each of Rs.10/- each totalling to Rs.1.00 lac. Both the Subscribers had not brought in their money immediately. The same was received only during September 2008.

You mentioned in your reply that Even if you receive the amount from subscribers after 6 months, the date of deemed Allotment and date on share certificate would remain the same i.e. date of incorporation of the company.

Please let me know how the paid up capital of the company will be reflected in the audited BS of the company as on 31.03.2008 ? Will it be shown as NIL or will it be shown like Paid up capital of Rs.1.00 lac and also Amount Recoverable from Subscribers of Rs. 1.00 lac. The same audited BS is to be filed with MCA / ROC. If Paid up capital is shown as Nil as on 31.03.2008, will there be any violation under Companies Act, 1956.Please clarify.

Thanks,

CA.Satendar Kumar

Email: skr_ca @ rediffmail.com

(Guest)

Mr. Ankur's reply is wrong.

You definitely do the violation of the Companies Act, 1956 rules.

Because when you subscribe the MOA of any company, In that MOA you have to mention the no. of shares subscribed in the company.

And any company can not even issue allotment letter without recieving the money and In your case your company has issued the Share certificate.

So, You definitely have violated the rules of the companies act.

If you need further clarification than contact me.

Ankur Shah (Practicing Company Secretary)

“Guru Gautam” Bungalow, Inside Parshwa Tower,

Nr. Shyamal Cross Road, 132ft. Ring Road,

Satellite, Ahmedabad – 15

Contact: + 91-9427633901

E-mail: ankurjewel @ gmail.com

Blog: csankur.blogspot.com

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 07 September 2009

Originally posted by :Ankur Shah (PCS)
"	Mr. Ankur's reply is wrong. You definitely do the violation of the Companies Act, 1956 rules. Because when you subscribe the MOA of any company, In that MOA you have to mention the no. of shares subscribed in the company. And any company can not even issue allotment letter without recieving the money and In your case your company has issued the Share certificate. So, You definitely have violated the rules of the companies act. If you need further clarification than contact me. Ankur Shah (Practicing Company Secretary) “Guru Gautam” Bungalow, Inside Parshwa Tower, Nr. Shyamal Cross Road, 132ft. Ring Road, Satellite, Ahmedabad – 15 Contact: + 91-9427633901 E-mail: ankurjewel @ gmail.com Blog: csankur.blogspot.com	"

Dear Mr. Shah,

I am sorry to say but it seems from your answer that you are far away from practical and corporate exposure.

I have nothing to say and i surrender.

Best Regards

(Guest)

Mr. Garg,

I don’t want to go into the details.

But I have said your answer wrong because, the company didn’t receive the single sum of money. If the company has received some Amount from shareholder than it will be ok.

And It will be the case of Partly paid-up shares case.

And The company received money after 9 months, If it will be 2 or 3 months than I will suggest some different route.

Tanay (CA Final Student) (274 Points)
Replied 12 December 2009

Sir plz send me the procedure for issue share certificates in a Private Limited Company to its shareholder.

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 12 December 2009

Ankur Sir has always best answer practically..

i agree wid ankur sir.. coz subscribers are deemed members & shareholders and form2 is not required to submit..

Adarsh

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 12 December 2009

Tanay,

Please find the attachment..

Attached File : 53 procedure for issue of share certificates.pdf downloaded: 380 times

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 12 December 2009

Tanay,

Please find the attachment..

Attached File : 25 issue of share certificate rules.pdf downloaded: 252 times

CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 13 December 2009

Originally posted by :CA.Satendar Kumar
"	Dear Ankur, The private limited company, in the present case, was incorporated on 11.12.2007. Subscribers to MOA had taken 5,000 shares each of Rs.10/- each totalling to Rs.1.00 lac. Both the Subscribers had not brought in their money immediately. The same was received only during September 2008. You mentioned in your reply that Even if you receive the amount from subscribers after 6 months, the date of deemed Allotment and date on share certificate would remain the same i.e. date of incorporation of the company. Please let me know how the paid up capital of the company will be reflected in the audited BS of the company as on 31.03.2008 ? Will it be shown as NIL or will it be shown like Paid up capital of Rs.1.00 lac and also Amount Recoverable from Subscribers of Rs. 1.00 lac. The same audited BS is to be filed with MCA / ROC. If Paid up capital is shown as Nil as on 31.03.2008, will there be any violation under Companies Act, 1956.Please clarify. Thanks, CA.Satendar Kumar Email: skr_ca @ rediffmail.com	"