Umang Jain (Article) (24 Points)
04 August 2011Hey,
please can anybody tell me what is the treatment of share application money pending allotment in a closely held public company as well as private company if it is outstanding for more than 5 years. Is there any time limit under the act for the allotment of money or it can be carried forward as it is for n number of years.
Kindly suggest me the treatment of this application money in our books.
ARUN KUMAR MAITRA
(Practicing Company Secretary)
(1016 Points)
Replied 26 July 2012
As per the revised Schedule VI, Share Application money pending allotment is required to be shown under two parts- part against whom shares will be allotted is in the nature of equity and the part which is due for refund is in the nature of liability.It should not be included in 'shareholders funds'. In case of over subscripttion ,it has to be presented under 'Other Current Liabilities." Further, the terms and conditions of allotment are to be disclosed.It has also to be disclosed whether the company has sufficient authorised capital to cover the the share capital amount resulting from allotment of shares against share application money.Further , the period for which the share application money has been pending beyond the stipulated period for allotment alongwith reasons for delay.In some cases ,the shares are not allotted and the money is refunded after a few years.In such case ,the true nature of funding is that of a loan
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