Can a Private company accept Share application money when its authorised share capital is less than that? I found the same issue in balancesheet of many companies i.e they show application money suppose 50lac and its authorised share capital say 5 lac rupees.. can anyone tell me regarding this issue and any section which deal this type of issue in companies Act...
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Relating Authorised Capital
Replies (2)
Hi....
In my opinion the Company can accept the Share Application money exceeding the Authorised Capital of the Company but before making an allotment of shares, the Company should increase its Authorised Share Capital....
God Bless
Udit Sharma
As per provisions of the Companies Act, once share application money has been credited, allotment has to be done withing reasonable time. As per commentry, reasonable time depends on fact to fact basis. However reasonable time is interpreted as 6 months except for some extra-ordinary cases.
I too agree, many of private companies are having share application mony in their balance sheet as mentioned by you. But, on scrutiny, they will very well come under violations. Also, company will have to provide justification for basis for subscribing shares and reason for non-allotment within reasonable time.
Regards
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