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A big issue

CA Darshak Shah (Practicing CA) (1889 Points)

12 April 2012

Recently I have come across a strange matter..Let me share it with you.

One person purchased some land/plot of Rs 40,00,000/- in cash in the name of Company on stamped agreement (dastavej) in January-2012(Say 20 January when transaction occured)

Company Incorporation date is 3 days after the above agreement date.(Say 23rd January-Certificate of Incorporation)

Company doesnt have any machinery or loan etc till 31-3-2012..It has only 1 Lakh Authorised Share Capital..

Now how to adjust such transaction in book?

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-Darshak Shah

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11 Replies

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 12 April 2012

In Stamped agreement, the wordings were

...in the name of...Mr XYZ, director of ABC Pvt Ltd..

Stamp Paper were purchased in the name of

ABC Pvt Ltd..

It seems complicated...Help...

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lucky bhatia (-) (37 Points)
Replied 12 April 2012

according to the company law none of the official can purchase the asset of the company

on its name, it could only be purchased on the name of the company.

in the particural situation the asset will be deemed to be of mr. xyz.

and if the company after its incorporation rectifies the same , then the company would have to raise

the secured or un secured loan on the name of mr.xyz

Palash Gupta (Student...Hoping to pass Inter) (892 Points)
Replied 12 April 2012

Yes,lucky is rite director cannt purchase any asset in its name...nly can act as promoter nd after incorporation co. may or may nt acept the asset in its name.!!!

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 13 April 2012

Based on the comment of Mr Lucky and Mr Palash, i would like to ask you that

Situation-1 If company accepts the same property

Than Do company needs to have cash in his books of account?

or simple entry will persist i.e. ( asset a/c dr to unsecured loan of director)?

Situation-2

If company rejects

than it will be shown as asset in the books of director and director will have to generate cash for the same in his books?

Am I right?

Please mention the time limit for accepting or rejecting the same...

I mean when should company have to pass resolution?

3 months or 6 months etc after the date of purchase of property???

lucky bhatia (-) (37 Points)
Replied 15 April 2012

if company rectify it then company would have to raise the debt and make the entry of purchase if it is already purcgased in cash or if have been purchased for credit just make credit purchase entry

not sure about time period of rectification, but it is about 6months

situation 2- there would be no matter of company if rejected, than it will be directors personal. and also company can do some legal prossedings against him it desires

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CA Darshak Shah (Practicing CA) (1889 Points)
Replied 15 April 2012

Lucky Sir,

Can I advise company to issue shares for consideration other than cash to directors?

And purchase the assets as well?

lucky bhatia (-) (37 Points)
Replied 15 April 2012

as per your article company only have authorised capital of rs 1 lakh

CA Darshak Shah (Practicing CA) (1889 Points)
Replied 15 April 2012

Yes sir,

Company will try to increase authorised share capitals and then after will allot it after passing resolution..

thats why i asked for time period limitation...

lucky bhatia (-) (37 Points)
Replied 15 April 2012

till the company increases its authorised capital, make the director unsecured or secured lender

CA Rashaad Meer (...) (129 Points)
Replied 15 April 2012

Darshak, Lucky bhatia has Correctly Answered Your Questions, I'vl go with him...

Ans for Que Raised In SITUATION 1

Cash A/c Dr.

To Loan From Director A/C

Asset A/c Dr.

To Cash A/C

Thus cash A/c will be NIL

SITUATION 2

---SAME AS Mr. Bhatia ANSWERED---