16 March 2010
dear expert, during the audit i found that the pvt. ltd. company received share application money amount of rs.40 lacs, so i want to know about that what should i check regarding this,,,, pls help me
In case any company has accepted the Share Application Money the same should be recorded 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.
Further the share application form from the proposed allottee should be collected for the record. You may download the sample share application from the link mentioned below:
16 March 2010
On the practical front this money is very much available to the company as nobody can trace this money. Reason being there is no such requirement to open some escrow account for the same application money.
Practically use of this money depends on the terms of subscripttion agreement between the prospective investor and issuer company.
Regarding time limit to convert such share application money into capital the law is silent. However as per practice (specifically mention/mandatory requirement in FEMA regarding foreign money) allot share with 6 months of the receipt of application money.
Further there is no need to maintain share application money in a separate account.
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