Share application money pending allotment

Thats not a good thing,do check this in detail. This share application money ought to be refunded

S. 42

Explanation II

"A company making an offer or invitation under this section shall allot its securities
within sixty days from the date of receipt of the application money for such securities and if
the company is not able to allot the securities within that period, it shall repay the application
money to the subscribers within fifteen days from the date of completion of sixty days and if
the company fails to repay the application money within the aforesaid period, it shall be liable
to repay that money with interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day:

Penalty: If a company makes an offer or accepts monies in contravention of this section,
the company, its promoters and directors shall be liable for a penalty which may extend to the
amount involved in the offer or invitation or two crore rupees, whichever is higher, and the
company shall also refund all monies to subscribers within a period of thirty days of the
order imposing the penalty."

As per Companies (Acceptance of Deposits) Rules, 2014

Deposit includes

"any amount received and held pursuant to an
offer made in accordance with the provisions of
the Act towards subscriptttion to any securities,
including share application money or advance
towards allotment of securities pending allotment,
so long as such amount is appropriated only
against the amount due on allotment of the
securities applied for;"

Explanation.- For the purposes of this sub-clause,
it is hereby clarified that -
(a) Without prejudice to any other liability or
action, if the securities for which application money
or advance for such securities was received cannot
be allotted within sixty days from the date of
receipt of the application money or advance for
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

[Note that its written THESE rules and not "this rule"]

Form INV 5 requires disclosure of unpaid deposits, you will have to file that aswell.

In balance sheet this is to be shown as a separate item, but since in this case this money is liable to be paid hence should should be treated as current liabilities

Similarly since this money is required to be refunded then same becames a current asset for the funding Co. but the fact that such money has not been received since so long,cast doubt on its recoverability hence check for the amount of provision required.

How come Funding Co. didn't took any steps?? *is that Co. also involved somehow*

Dear Anushka,

Companies Act 1956 : As the Company is a public limited company then the company could not hold share application money for more than 60 days in the light of unlisted public deposit rules 2011. Auditor must have qualified this is in his audit report for earlier years and amount must have been shown either as deposit in the borrowings or share application moreny due for refund under other current liabilities. 
 

Same is in the case of companies act 2013.

As rightly said by the above author lending company must disclose it in short term loans and advances and if required necessary provision needs to be created.

Thanks to both of you.

is it  applicable to Private Limited also, and in case allotment has been done and its return has not been filled , whether with penalth/late fee return now can be filled