Allotment of share

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2012 Dear All,
pls suggest the following query
i) can a pvt. ltd. company allot share before cash received from the party.

ii)what if cheque received on 25th march but not en-cash in bank(en cash in bank on april) but pvt co wanted to allot share on march only.

What is the procedure & consequence.

Regards
Bibhabasu

Ajay Mishra

Ajay Mishra (Expert)
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10 May 2012 Hi

1) You can not allot share before allotment/subscription money received.
2) The Board will allot shares on the credit of allotment money in its bank account. You will not allot on the basis of cheque received.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2012 Hello sir
Thank you for quick reply.
But I have taken a expert opinion from a Corporate Lawyer. According to him as Sction 75 on return of allotment states that:
"(a) file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allotees, and the amount, if any, paid or due and payable on each share:

[Provided that the company shall not show in such return any shares as having been allotted for cash if cash has not actually been received in respect of such allotment;]"
so, law is here silent about whether cheque is cleared on bank or not, u can file return within 30 days after confirming that cheque is encashed latter on but before filing Return . so as per views given , cheque is Negotiable Instrument and it is the discretion of the Board to allot shares after receiving the cheque.
Sir, can u clarify me that in which provision it is written that it should be credit in company's bank account before allotment?

Regards

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Ajay Mishra

Ajay Mishra (Expert)
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10 May 2012 Dear

For example, in case of listed company, when it make allotment on preferential basis, then stock exchange a certificate from CA/CS that the 25% upfront money has been received as on relevant date. On the date of allotment of shares the statement of account should show that balance 75% has received by company and Bombay Stock Exchange demand copy of bank statement regarding receiving of money.

For your understanding you can call to BSE and ask the same.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2012 OK Sir, Thank You for your reply.

Regards

Charu Srivastava

Charu Srivastava (Expert)
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10 May 2012 Department Clarification - I Department Letter NO. 8/4/69-CL-V dated
18-11-1969)*

*If consideration for allotment of shares is actual cash, then only the
allotment would be for cash. " Cash" is actual money or instruments e.g.
cheques which are generally used and accepted in money. If consideration
of a genuine debt or outstanding bills, for goods sold ad delivered,
marketable securities, time deposits in banks, then allotment cannot be
treated as for cash.*

With the above circular cheaque can be treated as cash..
other views are solicited.

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