SHARE APPLICATION MONEY

This query is : Resolved

RITESH RAJ PARIYANI (Querist)
Follow

07 August 2009 SUPPOSE COMPANY HAVE AUTHORISED SHARE CAPITAL OF RS. 55 LACS AND PAID UP CAPITAL IS ALSO RS. 55 LACS. NOW COMPANY ISSUED SHARE APPLICATION MONEY OF RS. 30 LACS. SO TOTAL OF PAID UP CAPITAL AND SHARE APPLICATION MONEY IS RS. 85 LACS WHICH IS MORE THAN AUTHORISED SHARE CAPITAL OF RS. 55 LACS. SO WHAT ARE THE CONSEQUENSES ARISE?

Ankur Garg

Ankur Garg (Expert)
Follow

07 August 2009 Hi,

As per facts provided by you paid up capital and authorised capital is Rs. 55 Lacs and company has also received share application money of Rs. 30 Lacs.

As per my opinion 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.

Best Regards

RITESH RAJ PARIYANI

RITESH RAJ PARIYANI (Querist)
Follow

07 August 2009 thank you sir

is there any time limit to convert such share application money into capital?

Upgrade to CAclubindia Pro. Subscribe Now!

CS SIDDHARTHA BANIK

CS SIDDHARTHA BANIK (Expert)
Follow

07 August 2009 Though I agree with Mr. Ankur that receiving of application money is not at all equivalent to allotment of shares and it does not make any change to the capital structure of the Company.

But, to allot further shares the BOD of a Company should take approval of the shareholders and other relevant authorities.

In the given case, it is evident that the Company has accepted the Share Application Money without getting such approval.Further, reason to accept share application money is to allot shares in future which is based on the approval of the concerned authorities.

When the BOD, at present, does not have any such approval to accept application money, this types of assurance to the concerned person to allot shares is equivalent to fraud.

Hence the BOD of the company should immediately repay the cash.

Thanks,
CS Siddhartha Banik

Ankur Garg

Ankur Garg (Expert)
Follow

07 August 2009 Well I disagree with the above views.

To allot further shares there is no need to take approval of the shareholders and other relevant authorities.

Only in case of public company share holders approval is required if and only if company is not allotting further shares to the existing shareholders.

As is evident that 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 allot share with 6 months of the receipt of application money.

Best Regards

Ankur Garg

Ankur Garg (Expert)
Follow

07 August 2009 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:

https://www.caclubindia.com/share_files/files_display.asp?files_id=11908

Regards