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share application

Arvind Khemka (practicing CA) (210 Points)

14 May 2010

suppose a pvt limited co has an authorised share capital of Rs 10 lacs and nominal capital of Rs 5 lacs, can that company recieve share application money for above Rs 5 lacs

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4 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 14 May 2010

Hi,

As per facts provided by you paid up capital is Rs. 5 Lacs and authorised capital is Rs. 10 Lacs and company has received share application money of above Rs. 5 Lacs.

As per my opinion receipt of share application money over and above of Authorised capital is not a default at all. Reason being share application money is not in the nature of paid up capital unless and until allotment of share against the share application money.

In other words only after allotment of share you can consider such share application money as paid up share capital. But before passing allotment resolution you have to increase your Authorised capital.

Making application to the company for allotment is just an offer pending acceptance from the company. Without acceptance the same would not be a binding contract for the company. Refer Indian Contract Act, 1872. Company reserves the right to reject the application and refund the share application money with or without interest as per the terms of acceptance of share application money.

This is my personal opinion. Wait for other expert opinion.

Receipt of Share Application money

Best Regards

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Mamta Batra (CS) (376 Points)
Replied 15 May 2010

agree with ankur sir.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 15 May 2010

Ofcourse, company can accept share application money, more than its Authorised Capital. But at the time of allotment excess money is to be refunded and allotment can not exceed in any case more than the authorised capital. However, before allotment company can increase its authorised capital and then shares can be allotted.

Neeta (Finance) (345 Points)
Replied 17 May 2010

As per my understanding ur company has AC of 10 lacs and have paid up 5 lacs and now want to accept application money above 5 lacs.

Surely, there isn't any prob in accepting application money more than the unsubscribed capital. It will exist in ur Balance Sheet as 'Share Application'. But before allotment u need increase ur authorise capital to accomodate the application money.

OR , at the time of allotment, after taking the amount equivalent to face value, remaining amount you can show as premium on allotment. But do go throu the valuation of shares before that.