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Share subscription - resolution

CS VIRAL SANGHAVI (Proprietor) (89 Points)

09 January 2012

Friends

Co is incorporated in may 2011 with 2 foreign subscribers & 1 indian. The subscribtion money was paid in jan 2012 by foreign shareholders.

Now question is

1) wht will be the date of issue of shares. (for filling it up into FCGPR)

2) Bank is asking for the resolution for allotment of shares, which resolution to be given?

Kindly guide me

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32 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 09 January 2012

Hello,

As per my understanding of company law, Subscribers of MOA are deemed shareholders of the company. They don't need to take shares. As soon as they subscribe the MOA by signing it & file it with ROC along with other incorporation documents they become the members as well as shareholders of the company. Appreciate further have you ever filed form-2 for the subscribers? The answer would be No. That itself is a kind of proof that no allotment is required to be made to the subscribers.

Form-2 is not required to be filed for subscribers hence no formal allotment is required in case of subscribers. They are deemed members and shareholders of the Company.

Regarding receipt of payment from subscribers I would say ideally such amount should be deposited by the subscribers after incorporation of the co. in the newly opened bank a/c of the company and record the same in the first BM Minutes.

Alternatively, as there is no tracing (as far as ROC is concerned) of such amount, it may be deposited by them later. As a CS I would suggested you should opt I option to avoid any kind of future problem.

DATE OF ALLOTMENT TO SUBSCRIBERS AND DATE TO BE MENTIONED ON SHARE CERTIFICATE

Date of allotment to subscribers will be the date of incorporation of the company and the same date will also be used for printing on share certificate to be issued to subscribers.

Practically & legally this is very much possible. To conclude you may use Date of Incorporation of the company for the purpose of:

Printing on share certificate of subscribers
as date of Allotment to subscribers
For the purpose of filling the column in register of member to enter the name of subscribers.

Even if you receive the amount from subscribers after 6 months the date of deemed Allotment and date on share certificate would remain the same i.e. date of incorporation of the company.

The above info is based on interpretation of Company Law prevailing in India.

Best Regards

1 Like

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 09 January 2012

Your case is a bit complicated as far as involvement of FEMA and RBI is concerned. As per reporting of FDI norms chronology of event should be:

Receipt of Foreign money.

Reporting of receipt of amount of consideration to RBI for issue of shares through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor from the overseas bank remitting the amount.

The equity instruments should be issued within 180 days from the date of receipt of the inward remittance.

In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be.

After issue of shares you have to file Form FCGPR, not later than 30 days from the date of issue of shares.

However in your case allotment is deemed and no formal allotment and form 2 with ROC is required to be done. I think you should go for some professional advice or should visit Delhi RBI office (FED Cell).

Wait for other opinions too.

1 Like

CS VIRAL SANGHAVI (Proprietor) (89 Points)
Replied 09 January 2012

Thanks Ankur ji,

RBI & FEMA is involved, thats why the problem has arised.

Actually, 1st problem is that the date of allotment of shares is to be mentioned in FCGPR, we cant write "since incorporation", because, RBI will go date by date and will tell that before money has received, you can't allot shares.

another thing regarding the resolution is that, the banks go as per checklist, and the resolution for issue of shares is in their check list, hence they ask for the resolution compulsorily.

Again if we mention the date of incorporation as the date of allotment of shares, then there will be violation of reporting of FCGPR.

(Guest)

Hi Viral,

I have gone through one to my companies case in which facts were 100% same as yours.

I have looked after its compliance with RBI.

As per my experience i advise you the following:

1. What will be the date of issue of shares. (for filling it up into FCGPR) :

Date of incopration shall be mentioned in Form FCGPR. Practically also think, there can not be any other date as allotment other than DOI.

2) Bank is asking for the resolution for allotment of shares, which resolution to be given?

Provide RBI with extract/ certified true copy of minutes of board meeting in which shares are issued to subscribers.

Also support all your papers with a formal meeting and a letter for condonation of delay in filing particulars with RBI.

That will be all. No need to worry. There will be no hassle whatsoever.

If you want i can also give you letter which i used for seeking condonation.

Thanks and Regards,

Neha Jain

1 Like

CS VIRAL SANGHAVI (Proprietor) (89 Points)
Replied 09 January 2012

Neha ji thanks for the help

And if you could provide me the letter, that would be the great favour.

But just for the clarification, i would mention the date of incorporation in the FCGPR.

But money was received later, what about that. ? Actually, the money was received in sept 2011, but due to bank delays, the UIN no was allotted in Jan 2012. So will it be okie, if we show the shares as "allotted".

(Guest)

Pls give your email id, I will forward you letter.

Yeah, there is no problem if your show shares as allotted since as rightly mentioned by Ankur Ji, subscibers are DEEMED MEMBERS of company. Formal issue of share certificate is not necessary to make them shareholders. Once they subscribe to MOA, they become shareholders of company on its incorporation.

1 Like

CS VIRAL SANGHAVI (Proprietor) (89 Points)
Replied 09 January 2012

its cs.viralsanghavi @ gmail.com

thanks very much for the help.

(Guest)

I HAVE MAILED YOU! PLEASE CHECK!

CS VIRAL SANGHAVI (Proprietor) (89 Points)
Replied 09 January 2012

Thanks , got it

Mayur Joglekar (trainee) (51 Points)
Replied 24 January 2012

pls send us the condonation letter on mj2612 @ gmail.com

(Guest)

Dear Mayur, I have mailed you pls check the same.

1 Like

Krishna (CA in Practice) (32 Points)
Replied 25 January 2012

Can any one help me for the below issue.

1)I have one private limited company client recently incorporated.Both the Directors are non resident Indian.Indian buisiness is taking care by General Manager and he is Indian resident and Indian

2.Directors invested to capital through cash in indian Rupees.

Please let me know is there any RBI and Fema compliance is required