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Company law

Srishti (Associate) (46 Points)

15 February 2011

In a Company having 10 lac Authorised Capital and 10 Paid up share capital and company accepts share application money. Can a company accept it? If the company is already accept then what are the consequences and what are the ways to came out without any penalty????

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5 Replies

Jaideep (Service) (1368 Points)
Replied 15 February 2011

Hi,

Yes Compnay can accept share application money, allotment has to be done within reasonable time. Reasonable time is not prescribe any where, however we can consider it as six months.

In your case company has to increase its authorised capital immediately so as to justify, acceptance of share application.

Other views are solicated.

Regards

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Sudhir Garg (Service) (236 Points)
Replied 15 February 2011

It is general scanario in closely held companies where company do accept share application money inspite of the fact that there in no margin in Authorised Capital. Until and unless, company does not make any allotment, I dont think there in any issue.

The purpose of share application is towards subscripttion of capital. And if company is acccepting the same, then in true sense there must be allotment until other circumstances exists. Therefore, company should avoid such practices of acceptance of share application money without raising the authorised capital Bar upto that extent.

Regards- Sudhir

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 15 February 2011

I agree with the view of Mr. Sudhir Garg. Being a Company Secretary, i would not advice to accept Share Application money if there is no marging in Authorised Share Capital.

However, in the above case, after accepting application money, Authorised Capital may be properly enhanced and then allotment can be made.

parthasarthy naidu (CS) (66 Points)
Replied 15 February 2011

Alternatively, the company can return the share application money to the applicants, if it does not want to increase the authorised share capital to absorb the share application money by making further issue of shares.

parthasarthy naidu