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Share application money

Kiran Toshniwal (Practicing Company Secretary) (142 Points)

02 December 2010

Hi,

Can a company receive Share application money be more than Authorised Capital.

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Paresh Rathod (CA) (222 Points)
Replied 02 December 2010

When co. issues shares - it is invitation to offer.

When application for shares is made - it is an offer.

When allotment of shares is made - it is an acceptance and contract is complete.

If the issue is not within authorised share capital, invitation to offer is beyond the powers of the company and hence it should not be accepted. In case of public issue, public companies are required to mentioned authority for the issue in the prospectus. Same principle is legally applicable to private companies also. However, in practice, many companies accepting share application money beyond authorised share capital which is legally not correct. In some cases ROC has treated such money as 'deposit' u/s 58A of Companies Act and issued notices for prosecution.