A company made preferential allotment during the year to its Promoters & their relatives
The Application money is kept in a separate bank account
But a sum exceeding the allotment made, has been transferred to another bank a/c and used in the normal course of business.
My doubt is...
whether the restriction on the usage of application money is applicable only for Public issue or for all issues (including Preferential)?
Kindly post your views
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 02 June 2010
You can use share application money in normal course of business subject to the terms of agreement with prospective shareholder, if any.
However if the transaction (allotment of equity) failed to crystallize then company is liable to refund entire share application money.
This is my personal understanding. Wait for other expert opinions and decide accordingly.
Best Regards
vivek
(CS)
(751 Points)
Replied 02 June 2010
As far as my point of view is concerned public issue is done with specified purposes which we disclose in RHP and on the basis of that general public invest in our security but this is not the case with preferential allotment which is normally done as per company's internal strategy, so it can be used as per business requirement.
Others views solicited....
Thanks Ankur ji and Vivek
The said case is that of a listed co.
In the SEBI Guidelines there is no specific clause regarding the utilisation of the Preferential Warrant applciation money.
Does it imply that there is no restriction and hence the company has every right to use the money immediately on receipt ??
waiting for further views.........
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 04 June 2010
Okay...Earlier you haven't mention that it is for a listed company. Tell me are you talking about 25% upfront money?
However i'll follow my previous observation:
You can use share application money in normal course of business subject to the terms of agreement with prospective shareholder, if any.
However if the transaction (allotment of equity) failed to crystallize then company is liable to refund entire share application money.
Absolutely... yes ankur ji
The promoters & others paid 25% of application money in August 09
The company made the allotment in Sep for which further amount was received.
There is also a clause that the 25% can be forfeited if the option is not excercised in 18 months.
Does this have any impact on the utilisation?
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 04 June 2010
Please do not call it application money again and again…creating confusing you know…Let me share with you that I have handled 4 preferential allotments and get them listed on NSE, BSE and DSE including one F.I.I. preferential allotment. Anyways let’s come to your query…
If the proposed allottee failed to exercise its right to convert within 18 months then Issuer Company has a clear cut right to forfeit entire 25% upfront money…and has a right to use this money.
Thanks
Bela Thakkar
(CS)
(30 Points)
Replied 28 December 2010
Hello All,
Can any1 guide with the procedure for preferential allotment for Listed Company? the compliances with nsdl, cdsl, rta, bse any other authority?
Chetu
(Articled assisstant)
(28 Points)
Replied 14 February 2011
Dear all
Is there any time limit for receiving the money for shares issued on preferential allotment by an unlisted company
pls help me in solving this query
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
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