1) What are the regulations / provisions relating to usage of Share application money pending allotment. Can this money be utilised by the co for any purpose or is there any specific provision in the Cos Act, ICAI guidelines etc?
2) When a co (unlisted / limited) receives share application money, within what time period shares are to be alloted or refund are to be given?
08 March 2010
1) For an unlisted company, there are no restrictions on the usage of share application money. A listed company, however, cannot use the money till the allotment is made. And even afte allotment, the money can be utilised only for the purposes for which the capital is raised.
2) There is no limit within which allotment or refund is to be made by an unlisted company.
Companies Act is silent about the treatment of share application money.
In case the Company has accepted the Share Application Money you may do one simple thing. You may record 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.
Regarding time limit to convert such share application money into capital the law is silent. However as per practice (Based on FEMA rules for foreign money) allot share with 6 months of the receipt of application money.
Further collect the share application form from the proposed allottee for your record. You may download the sample share application from the link mentioned below:
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