Authorised share capital

This query is : Resolved

Gopal Suthar (Querist)
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23 August 2011 Can Paid-up share Capital and Securities premium a/c. exceed the Authorised share capital of a company.

eg. Authorised Share capital = Rs.500000
Paid-up share capital = Rs.400000
Securities premium = Rs.400000

Is there any violation of Companies Act in the above eg. ??

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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23 August 2011 No violation. Paid up share capital can not exceed authorized share capital. So in the given case no violation.

RG - A Helping Hand

RG - A Helping Hand (Expert)
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23 August 2011 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.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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23 August 2011 Richank Ji i think Gopal Ji is not concerned about share application money. He is concerned whether Share Capital + Securities Premium ....which is greater than Authorized Share Capital will result in violation of Company Law?
And i think there will not be any violation in the given case.

RG - A Helping Hand

RG - A Helping Hand (Expert)
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23 August 2011 u r very right sanjay Ji...

infact ur reply was enough. But i thought let's share something extra...

so i tried to add some value to my reply...
sab aap sa hi sikha hai sir...

Gopal Suthar

Gopal Suthar (Querist)
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24 August 2011 thank u very very much Sanjay ji for your reply.and thanks to Richank ji also as the point he discussed is also ralated to my query which i have not incorporated and that resolved even without asking.
Thank you.