Acceptance of share application money exceeds authorised cap

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 December 2011 ABC Ltd is having authorised capital and paid up of Rs. 800 Lac. Further Company has accepted share application money without increasing its authorised capital. Is there any voilation? or company can accept such application money and alter its capital before allotment.

Guest

Guest (Expert)

12 December 2011 There is no violation. Do not worry. Share application money can be accepted by the company even if authorised capital is exhausted.

Before allotment authorised capital can be raised.

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RG - A Helping Hand

RG - A Helping Hand (Expert)
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12 December 2011 Hi,

Agree with expert.

As per my opinion also receipt of share application money over and above of Authorised capital is not a default at all. Reason being share application money is not in the nature of paid up capital unless and until allotment of share against the share application money.

In other words only after allotment of share you can consider such share application money as paid up share capital. But before passing allotment resolution you have to increase your Authorised capital.

Making application to the company for allotment is just an offer pending acceptance from the company. Without acceptance the same would not be a binding contract for the company. Refer Indian Contract Act, 1872. Company reserves the right to reject the application and refund the share application money with or without interest as per the terms of acceptance of share application money.

RG

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