Ajay Mishra
(Company Secretary)
(74342 Points)
Replied 23 March 2012
Hi
As such section 81 does not defined any penality and procecution on contravention of section 81(1A) of the Companies Act, 1956. But in Unlisted Public Companies (Prefeential Allotment) Rules 2011, it only says refund of money within 15 days or pay 12% p.a. in case of not paid intime.
In Rule it is not specificaaly mention the name and style of Bank Account so you can kept such application money in Bank A/c as u decide but restricted to use them before allotment.
It is my personal views, other views will also consider.
Regards
Ankur Garg
(Company Secretary and Compliance Officer)
(114783 Points)
Replied 23 March 2012
Agree with Ajay…
Penal provisions i.e. charging of interest on application money @ 12% p.a., in case fail to repay the same within prescribed time limit.
Regards
Sir/s,
Rule 8 (4) says :
Provided that the monies received on such application shall be kept in a separate bank account and shall not be utilised for any purpose other than—
(i) for adjustment against allotment of securities; or
(ii) for the repayment of monies where the company is unable to allot securities.
It means seperate bank account should be there which is not having the characterstics of normal running business account.
Ankur Garg
(Company Secretary and Compliance Officer)
(114783 Points)
Replied 23 March 2012
Yes.
To be fully compliant it is very much advisable to open another bank account for share application money.
Regards
| Originally posted by : Ajay Mishra | ||
 |
But in Unlisted Public Companies (Prefeential Allotment) Rules 2011, it only says refund of money within 15 days or pay 12% p.a. in case of not paid intime. |
 |
Sir/s,
Thanks for your replies gentlemen.
Actually my query is if we fail to comply with the new provision of share application money regarding
- allotment within 60 days and / or
- keeping in seperate bank account.
In that case ON THE HIGHER / MAXIMUM SIDE what are the penalties which can be imposed on the company and directors ??
Are the directors held liable for contravention of rules u/s 629 A which is applicable when no specific penalty is provided in the act. OR we are just liable to pay 12% interest on that amount and make good our default / non compliance / violation.
We are happy with paying 12%, there are no issues with us about interest front. We just wish to ensure can we be made liable under any other section for prosecution.
Thanking both of you in anticipation.
Ankur Garg
(Company Secretary and Compliance Officer)
(114783 Points)
Replied 23 March 2012
As per my understanding in case of violation regarding preferential Allotment provisions of section 81(1A), the penalty u/s 629A is not applicable. Reason being the same is governed by Unlisted Public Companies (Preferential Allotment) Rules, 2003, in the form of Interest and we cannot say that no penalty provided in law for violation regarding preferential Allotment.
However for other provisions of section 81, the penalty u/s 629A should become applicable as section 81 is silent regarding the same.
Further to my opinion it is a matter of discussion and views above are based on my personal understanding.
Thanks
Rule 2 (1) says :
‘(1) “preferential allotment” means allotment of shares or any other instrument convertible into shares including hybrid instruments convertible into shares on preferential basis made pursuant to the provisions of subsection (1A) of section 81 of the Companies Act, 1956;
In my view it is appliable for section 81 (1A) only and not for 81.
Pls correct me if I am wrong!
Ankur Garg
(Company Secretary and Compliance Officer)
(114783 Points)
Replied 23 March 2012
| Originally posted by : Neha Jain | ||
|
|
Ankur Jee, Unlisted Public Companies (Preferential Allotment) Rules, 2003 are applicable for right issue u/s 81 or 81 (1A) or both ? Thanks so much for your detailed and informative replies, as always. |
|
Come on Neha Ji…please do not get confuse regarding this…these rules are for preferential allotment and connected with section 81(1A) and has nothing to do with section 81. This is to remind you that section 81 is for “Right Issue”.
That is why my interpretation says… in case of violation regarding preferential Allotment provisions of section 81(1A), the penalty u/s 629A is not applicable. Reason being the same is governed by Unlisted Public Companies (Preferential Allotment) Rules, 2003, in the form of Interest and we cannot say that no penalty provided in law for violation regarding preferential Allotment.
However for other provisions of section 81, the penalty u/s 629A should become applicable as section 81 is silent regarding the same and has nothing to do with preferential allotment.
Ankur Garg
(Company Secretary and Compliance Officer)
(114783 Points)
Replied 23 March 2012
| Originally posted by : Neha Jain | ||
|
|
Thank you Thank you! Lastly, if contravention is ony regarding not keeping funds separately and using them for business purpose before allotment then whats the penalty? Thanks |
|
Rules are silent regarding penalty for this default.
Personally I feel it would not be a big issue as long as a company receives Share application money and allot shares within time limit.
As said earlier it is very much a loophole waiting for right clarification.
Regards
Ajay Mishra
(Company Secretary)
(74342 Points)
Replied 23 March 2012
Certification Course on GSTR-3B Reconciliation with GSTR-2B through AI Tools
CAclubindia
