share application money

5055 views 3 replies

karuna

working

42 Points Joined April 2009

Dear Seniors,

Please help me with the right solution for the below mentioned questions,

1. Situation : Our Pvt Ltd Companies Authorized Share Capital is Rs. 5,00,000/- raised a share application money of Rs. 22,00,000/- in March 2008 till now, we are holding the share application money we haven't issued any shares.

Question 1: How long can we hold this money ?

Question 2: what is the procedure for the transfer of application money ?

Question 3: is there any legal penalities for the same ?

Question 4: to which head money can be transfered ?

2. Situation : Company was incorporated in India, We have 2 Indian Directors, we have added 2 Foreign Directors. We have received Rs. 27 lacs from Foreign Directors, We have taken this amount as share capital without issuing any shares

Question 1: Which head should this amount be booked ?

Question 2: What is the procedure for accepting foreign capital ?

Question 3: Is it necessary to file the FIRC certificates to ROC and RBI ?

Replies (3)

Ankur Garg

Company Secretary and Compliance Officer

114783 Points Joined January 2009

Hi,

As per facts provided by your authorised capital is Rs. 5 Lacs and company has also received share application money of Rs. 22 Lacs.

As per my opinion receipt of share application money over and above of Authorised capital is not a default at all. Reason being share application money is not in the nature of paid up capital unless and until allotment of share against the share application money.

In other words only after allotment of share you can consider such share application money as paid up share capital. But before passing allotment resolution you have to increase your Authorised capital.

Best Regards

Ankur Garg

Company Secretary and Compliance Officer

114783 Points Joined January 2009

As is evident that the Company has accepted the Share Application Money you may do one simple thing. You may record the above transaction i.e. receipt of share application money and assurance given to proposed allottee in the board meeting minutes.

In other words simple noting of such receipt in the board minutes would be enough. No need to take any kind of approval from any concerned authorities.

Regarding time limit to convert such share application money into capital the law is silent. However as per practice allot share with 6 months of the receipt of application money.

Best Regards

Further collect the share application form from the proposed allottee for your record. You may download the sample share application from the link mentioned below:

/share_files/files_display.asp?files_id=11908

Regards