06 December 2011
A Govt Company is authorized with the total capital of Rs. 10 crores. its issued, called up and paid up capital is 8.1 crores and has Rs. 4.3 crores as share application money pending allotment since 2007, which it has got from state govt. My query is whether: 1. the company can keep money in "share application money pending allotment a/c" which is more than its total authorized capital without amending its capital clause. 2. to what extent it is the violation of the corporate laws as more than 4 years have passed since the company has kept the money in the said account and not transferred it to "paid up capital account" 3. shouldn't the company transfer the application money pending allotment to paid up capital account to the extent of its authorized capital and for the remaining apply to ROC for amendment in capital clause?
Please take note that Companies Act 1956 does not prohibit any where in the Whole Act to receive Share Application Money above the Authorized Share Capital.
But there is a Company Law Boards Judgement Regarding This and if You will see Schedule VI of the companies Act 1956 then it requires that if the Share Application money Received pending Allotment and it goes beyond One Year Then you have to Show it as Unsecured Loans.So Violation is of Schdule VI of the Companies Act 1956....
11 December 2011
thank you Suraj.. kindly take note of this too, As per new Schedule VI, applicable from April 2011, Share Application money pending allotment shall be grouped under other current liabilities. In your reply you said that as per the court decision, it should be grouped under Secured Loans, in case the period goes beyond one year. I checked for the same in schedule VI also but failed to find any explanation provided there. Could you please provide me the complete details of the case in which the decision to group it under secured loans was given.
CAclubindia
