Shruti Chawla (CS) (258 Points)
11 May 2010Which of the following is default under 58 A by a pvt. Limited Company-
1. acceptance of share application money from relative of director
2. acceptance of share application money from relatives of shareholdes
3. acceptance of shareapplication money from persons other than directors, shareholders and their relatives.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 11 May 2010
Kindly check rule 2(b)(ix) of the Deposit Rules, 1975 below:
Any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company:
Provided that the director, relative of a Director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;
Your Query:
1. Acceptance of share application money from relative of director---Perfectly fine and exempt from Deposit Rules, 1975.
2. Acceptance of share application money from relatives of shareholdes---Not covered by exemption above. Hence may be treated by ROC as violation of section 3(1)(iii)(d) and consequently section 43 becomes applicable. (See note below)
3. Acceptance of share application money from persons other than directors, shareholders and their relatives---Clear cut case of violation of 3(1)(iii)(d) and consequently section 43 becomes applicable. (See note below)
Note: Acceptance of share application money by private company in point no. 2 and 3 above may be treated by ROC as deposit if kept in the form of share application money, for an unjustified long period by the company.
If such private company accept share application money from the persons mentioned in point no. 2 and 3 for short duration and allot shares against it than there would be no problem.
Views of other learned members solicited.
Shruti Chawla
(CS)
(258 Points)
Replied 11 May 2010
What as per you would be unjustified long period , sir?
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 11 May 2010
Regarding time limit to convert such share application money into capital the law is silent. However as per practice (based on FEMA Rules) allot share with 6 months of the receipt of application money. Rest is dependent on ROC. He may take action during scrutiny of company balance sheet as you have to show share application money as liability.
Another thing is noting of such receipt in the board minutes would be considered as good secretarial practice.
Further collect the share application form from the proposed allottee for your record. You may download the sample share application from the link mentioned below:
/share_files/files_display.asp?files_id=11908
Best Regards
CAclubindia
