Share application money

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Gargi Ranade

144 Points Posted on 05 May 2014

Dear all,

As per Deposits Rule and Private Placement Rules , funds brought in as a share application money can not be appropriated other than for allotment or for Refund as the case may be , further this funds has to be kept in scheduled Bank in Separate Account ,

If Company makes fixed deposit of this funds in Schedule Bank , whether this will be treated as a contravention of Companies Act ,2013?

Replies (2)

P C Agrawal

Registered independent director Past Ch

5233 Points Posted on 05 May 2014

Proviso to Sec.42(6) reads as under:

Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than---

a) for adjustment against allotment of securities; or

b) for the repayment of monies where the company is unable to alllot securities.

Section does not restrict deposit to current account only. FD is also a bank account. In my opinion if FD is not given as lien and is free, it should meet requirement of the Section. In any case, no one except the Bank itself is going to be benefitted if money is kept idle in current account.