Share application money

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Vishnu Kiran Shastry

Chartered Accountant

21 Points Posted on 26 April 2014

Hi All,

Private Limited Company

According to Companies Act 2013, share application money collected cannot be retained with the company for more than 60 days and shares needs to be allocated within 60 days of receiving share application money. However nothing in this regards is mentioned in the Companies Act 1956.

My question:

Share application money is received before applicability of Companies Act 2013. Shares have not yet been allocated.

Is the section specifying 60 days applicable to share application money received before introduction of Companies Act 2013?
If yes, from when 60 days time should be considered?

Thanks in adavance for your help and guidance!

Replies (4)

P C Agrawal

Registered independent director Past Ch

5233 Points Posted on 26 April 2014

Even if no period was specified in CA 196, shares should be allotted within a reasonable period. Application for shares is addressed to the Board and Board cannot keep it pending indefinitely without any decision. Board should either allot or refund the amount.

In any case, considering intention of the law, it will be advisable to either allot the shares or refund the amount within 60 days from 1.4.2014.

RAMESH BABU KURALLA

COMPANY SECRETARY IN PRACTICE

44 Points Posted on 27 April 2014

I think MCA may notify on it soon.

Ekta

Practicing CS

305 Points Posted on 30 April 2014

Though there is no specification regarding share application money outstanding as on commencement of the CA, 2013, In Companies (Acceptance of Deposits)Rules, 2014, in rule 2 sub-rule (vii), in its explanation it is clarified that, "any applicatio money was received can not be allotted within sixty days from the date of receipt of the application money or advance fro such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules."

It means any application money outstanding as on the date of commencement of this Act, if the same is not refunded within 60+15 days, will be treated as deposits under acceptance of deposits rules.

Experts comments are invited.