19 May 2008
Under our audit it was found there is a public ltd co, in which they in receipt money which is shown as unsecured loan & as against such they have issued shares & such issue shown as share application money. The amount of loan received is lesser than the amount of Shares Alloted, then how to deal with this case. and if there is excess receipt of loan than shares alloted, then in which time limit the amount it should be refunded
19 May 2008
if it an unlisted company it is ok. otherwise for a listed co. there arise many violations. EVEN IN YOUR CASE THE VIOLATIONS ARE NOT LESS. FIRST OF ALL A LENDER IS SUPPOSED TO GET INTEREST BUT NOT SHARES. NOW WE HAVE TO FOLLOW THE FOLLOWING PROCEDURE. 1. FULLY PAID SHARES WILL BE ALLOTTED AGANIST FULL REPAYMENT OF UNSECURED LOAN, UNDER AN AGREEMENRT WITH THE CO. AND THAT THERE IS A BOARD RESOLUTION FOR SUCH ALLOTMENT. 2. ALSO YOU NEED TO COMPLY WITH UNLISTED COMPANIES PREFERENTIAL ALLOTMENT OF SHARE RULES 2003. 3.UNDER THESE RULES AN UNLISTED CO. NEEDS TO PASS A SHAREHOLDER RESOLUTION FOR THE PREF. ALLOTMENT OF SHARES TO THE UNSECURED CREDITOR IN SETTLEMENT OF HIS/HER UNDSECURED LOAN DUES. 4. ACCORDINGLY THE SHARES WILL BE ALLOTTED IN BOARD MEETING. 5. SHARES MAY ONLY BE ALLOTTED TO THE EXTENT OF THE LOAN BALANCE.EXCESS SHARES CANNOT BE ISSUED. 6.IN YOUR CASE, IF SHARE CERT. IS ALREADY ISSUED PL. CALL BACK AND CANCEL THE SHARE CERT. IMMDTLY.CANCEL ENTRY IF ANY PASSED IN ACCOUNTS INCREASING PAID UP CAPITAL. IF ALREADY FILED FORM 2 ,YOU MAY IMMDTLY FILE FORM CANCELLING SAME AS WRONGLY FILED AND INFORM ROC . THE SHARES ISSUED ARE ALREADY IN VIOLATION OF COMPANY LAW AS I PRESUME THAT UNLISTED CO. PREF. ALLOTMENT RULES WERE NOT COMPLIED WITH.SO ANY SUCH ISSUE EVEN IF MADE IS ILLEGAL.SHARES ISSUED CANNOT BE SHOWN UNDER SHARE APPL. MONEY. FOLLOW ITEM 6 ABOVE AS FIRST STEP. THEN FOLLOW STEPS 2 TO 5 ABOVE. R.V.RAO
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