18 January 2010
In Case of public Co there are explicit guidelines for application & refunding of application money, but expect few "if's & but" in FEMA/RBI guidelines the laws are literally silent regarding treatment of the same in case of a private co.As such i have observed audited Balance sheets(Pvt Co) wherein "application money(pending Allotment)" appears as a multiple or times of the paid up capital even at times surpassing the authorized capital. Honorable Experts,Plz Clarify the following in parlance of the aforementioned observations:
1)How can a Pvt Co have excess Share application money since there is no question of Over subscription. 2)Share application money is a part of prospective share capital yet to be alloted then should'nt it be locked up in special account without any mis-utilization? 3)The comments of the auditors concerned spells that(verbal explanation)it is the owners fund used temporarily for financing the working capital which may be withdrawn again.If this is true then is'nt the concept of corporate veil invoked(one man business)?
Please provide me your most valuable comments. Sincerely thanking you all in advance.
18 January 2010
1) A Pvt. Co. can have excess share application money on the basis of its plans to allot shares in the near future. 2)There are no provisions in the act to keep the share application money under lock-in or in a special account so as to avoid mis-appropriation 3) No. Because owners fund in this parlance means funds of equity shareholders collectively.
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