Issue of share certificate

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

12 December 2013 Date of Incorporation of Company- 16.03.2012
Authorised, issued n subscribed capital as on 31.03.2013 is 500000.00
BM issue of shares to subscribers 15.04.2012
Money received from subscribers is as follows
Particulars Receiving date
Subscriber 1 28.05.2012
Subscriber 2 08.06.2012

Bank Account opening date is 05.05.2012

my querry is whether subscribers to MOA can be allotted shares on 15.04.2012 ie before receiving the share money from them.. is it possible? or it has to be done only after receipt of share amount? wud this lead to contravention of section 3(1)(iii) of Companies act, 1956
and what are the implications for issuance of share certificate?

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013
Provisions of section 12(1) of the Companies Act, 1956 are relevant in this situation, which provides that in order to form a public company limited by shares at least seven persons and in case of a private company limited by shares at least two persons have to subscribe their names to Memorandum of Association. Following conditions in that matter shall be ensured by the subscribers:—

(i) No subscriber of the Memorandum of a company having a share capital shall take less than one share, [Section 13(4)(b)] and

(ii) Each subscriber of the Memorandum shall write opposite to his name, the number of shares he takes. [Section 13(4)(c)]

Subscribers can be either literate or illiterate, man or woman, either resident or non-resident, either Indian national or foreign national, etc. A company being an artificial legal person can also be a subscriber.

Even though the signature of a subscriber to memorandum of association of a company is not properly attested, once the memorandum has been registered, such subscriber cannot divest himself of his liability.

A subscriber to memorandum cannot, after issue of certificate of registration, repudiate his subscription on ground that he was induced to sign by misrepresentation of an agent of company. [Metal Constituents Ltd., In re (1902) 1 Ch. 707].

If subscribers to memorandum have any objection to memorandum and articles of association, the time to object is before putting their signatures to it. [East Bengal Sugar Mills Ltd., In re (1941) 11 Comp Cas 169 (Cal)].

In accordance with the provisions of section 36(2) of the Companies Act, 1956, all money payable by any member to the company under the MOA or AOA shall be debt due from him to the company. Further, a subscriber to the memorandum must pay for his shares in cash even if the promoters have promised him the shares for services rendered in connection with the promotion of the company.

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013 Issue of shares to the subscriber on the date of incorporation of the company.
But yes, date of issue of share certificate can be date of first Board meeting or there after. But it is not mandatory that subscribed money should be received to the company before issue of share certificate.

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Querist : Anonymous

Querist : Anonymous (Querist)

12 December 2013 can u please clarify that wil section 3(1)(iii) wud be attracted here?
on what date should i pass a resolution for issue of shares to subscribers?

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013 Yes, you will pass a resolution for issue of share certificate to subscriber.

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013
AUTHORITY FOR ISSUANCE OF SHARES TO THE SUBSCRIBERS TO THE MEMORANDUM S OF ASSOCIATION OF THE COMPANY.

The Chairman informed the Board that the Company has received the subscription amount as stated in the subscription clause of the Memorandum and Article of Association for issuance of 15,000 equity shares of Rs. 10 each for Rs. 1,50,000 only from the subscribers to the Memorandum & Article of the Company. The Board considered and passed the following resolution unanimously.

“RESOLVED THAT the subscribers to the Memorandum of Association be issued 15,000 Equity of Rs. 10 each which they have agreed to take as per details below:-

S. No. Name of the Shareholder Address No of Shares Dist. No. of Shares From- To Folio No. Certificate No. Amount (Rs.)

FURTHER RESOLVED THAT the equity shares certificate of the company in respect of such shares be issued to the aforesaid subscribers under the common seal of the company and the same be signed by any two directors of the Company and one authorized signatory of the Company.

FURTHER RESOLVED THAT the name of the above subscribers be entered into the Register of Members of the Company.”

Querist : Anonymous

Querist : Anonymous (Querist)

12 December 2013 is there a requirement that company should have minimum Rs. 1lac of paid up capital at time of incorporation?

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013
Requirements of minimum paid-up capital
Every private company requires minimum paid up capital of Rs. 1 lakh and public company requires minimum paid up capital of Rs. 5 lakhs. Now new company cannot be registered which is having less than the minimum paid-up capital required
However, as per section 3(6) no criteria for minimum paid up capital is applicable for the Companies registered under the provisions of section 25 of the Act. It is not stated in this provision when the new companies should issue the minimum shares after incorporation and make them paid-up to the extent required under the law. However the promoters shall undertake to subscribe in the Memorandum and Articles, the minimum amount of capital as required and should allot the same at the first Board meeting of the company.

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Querist : Anonymous

Querist : Anonymous (Querist)

12 December 2013 can u please support your statement that share money from subscribers can be received after allotment of shares to them.. with section of companies act

Ajay Mishra

Ajay Mishra (Expert)
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12 December 2013 read section 36(2) of the Companies Act, 1956.

Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2013 Sir in my case the subscribers to moa have paid the money for shares after the bank account has been opened by cheque. Now can company allot the subscribers shares before receiving the money? and is there any requirement in the Companies act that at the time of incorporation there should be a minimum capital of rupees 1Lac?