Issue of Shares to Subscribers to Memorandum of Association

Originally posted by : vikram soni
	Agree wid frnds.......

Any company if not having raised its paid capital upto the minimum prescribed as per sec 3(5) makes itself liable to be struck off the register.

Thus a Company must raise its paid up capital at an earliest opportunity keeping in view the practicality of the situations.

However, the paid up capital can be raised from the persons other than the subscribers of MOA and yet the subscribers may not have paid for the shares they had agreed to subscribe. This is allowed by the Companies Act, 1956 as in the event of winding up of the company by virtue of provision of Sec. Sec 426 (1) (d) provides as under:

In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to the provisions of section 427 and subject also to certain qualifications, which inter alia includes the following qualification in clause d of Sec 426(1)

------in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member-----

Thus a subscriber may not pay the amount he has agreed to subscribe and yet the company, if having raised its paid up capital above the minimum paid up capital as prescribed u/s 3(5) may continue. However, in the event of winding up such subscriber shall have to contribute the promised amount specified by him in the MOA.

Further, the shares cannot be issued to any person if no money has been received against it albeit the law allows issue of partly paid up shares. Thus at least some amount in cash or in kind for the money worth must have been received from the subscriber or the applicant, as the case may be, before shares can be issued to him. Thus it would not be correct to show the date of issue of shares to the subscriber before actually receiving the share money. Hence the date of the issue of shares to the subscriber can be on the date of incorporation only if the share money has been received on that date itself.