Query related to Acceptance and use of Share Application MOney
shilpa jain
Can a Company accept share application money more than its Authorized
Share Capital for example:
Present Authorized Share capital is : 1,20,00,000/-
Present Issued Capital is : a)1,20,00,000/- or b) 1,10,00,000/-
Share Application Monney is : 15,00,00,000/-
Further in the case of a private limited company can it use this fund
for purchase of land or building for busines purpose and if yes then
for how long time it can use the funds is there any specified time
limit or what is the general practice in such cases.
Please throw some light with related prov. or case laws for further reference.
Thanking you
--
CS SHILPA SOGANI
B.COM(HONS.), M.COM, ACS, LLB(P)
+ 91-94140 44880
Kamesh
U can use d same as u aware that even if u use the amount is standing in the B /s as application money.
Most companies doing that.
Legally dat is wrong but we can manipulate the accounts
Kamesh
Sent from my Nokia E- 71 phone
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shilpa jain
part of paid up capital untill it is allotted but can you plz refer
any case law or provision for further refernce in the matter.
Thanks
bhavani prasad
I sincerely request our fellow members not to use such type of language in mails.
CS Bhavani Prasad C N
Company Secretary
shilpa jain
You are right that it can misgudie me or other freshers but its not
the fact, actually Mr. Kamlesh helped me by solving my query in the
manner what exactly I want to know that is what a general
practice...as there is no as such written any where in this matter as
far as my knowledge.....and thats why I asked my this point with my
seniors learned members of this group.
Thanks kamlesh ji..
karna1711
generally some companies are doing.
On Mar 22, 4:38 pm, shilpa jain <csshilpaj...@gmail.com> wrote:
> thanks Bhavani ji,
>
> You are right that it can misgudie me or other freshers but its not
> the fact, actually Mr. Kamlesh helped me by solving my query in the
> manner what exactly I want to know that is what a general
> practice...as there is no as such written any where in this matter as
> far as my knowledge.....and thats why I asked my this point with my
> seniors learned members of this group.
>
> Thanks kamlesh ji..
>
>
>
>
>
>
> > Dear Mr Kamlesh
>
> > I sincerely request our fellow members not to use such type of language in
> > mails.
>
>
> - Show quoted text -
CS Amar
CS Amarendra Jena
Vivek Hegde
Many companies receive deposits in violation of section 58A of the Act and the Rules framed there under.Such amounts are classified as share application money taking the loophole in the Act ,which as of now, does not prescribe any time frame for allotment of shares in the case of unlisted public companies and private companies.
Many private companies exploit this loophole to keep under wraps the violation of section 3 requirements which prohibit acceptance of deposits from the public.
I raised an objection when a private company wanted to raise share application money without increasing the authorised capital. They accepted my view only after taking a written opinion from a senior officer retired from the MCA.I understand that department has already instructed RoCs to examine such cases and launch prosecution if necessary.
In another case,at the time of technical scrutiny,RoC officials raised an objection on the same issue. There were provisions in the AoA of the pvt. company for issue of shares in the agreed ratio between two parties. Necessary permission was already taken from RBI for receipt of share application money from foreign sources. Since the local parties could not bring in their contribution, the shares could not be allotted in the agreed ratio. As a result, the share application money received from foreign sources was pending allotment for many years. Of course, the authorised capital was not an issue in that case. After these facts were explained, Roc did not take any action. The Company had to produce all the documentary evidence for not alloting the shares.
If share application money is received in accordance with law for the purpose of meeting the immediate requirements, the company should increase the authorised capital within a short time. One should take a stand on the facts and circumstances. In such cases, if RoC or any statutory authority raises an issue, one should be prepared to explain it to their satisfaction.
Otherwise, penal provisions under the sections 3 & 58A of the Act as may be applicable will follow depending upon the nature of the transaction, persons from whom the amounts were collected,etc.
In short, substance will prevail over form. If the amount received is indeed a deposit within the ambit of section 58A or a prohibited transaction within the meaning of section 3 of the Act, mere classification under the head of share application money should not be permitted since it is illegal to do so.
In any event, keeping amounts received as share application money without allotment will always invite the attention of statutory authorities.
I agree with this view.
--
Warm Regards
CS Vivek Hegde,B.com, ACS, CWA
Company Secretary in Practice
No. 405, 4th Block, 7th Cross
Koramangala, Bangalore-560034
Mob: 09019756940/09900898223
shilpa jain
I thought this legal clarifiaction will help me in further reference.
Further do you have any printed version for the same or can u tell me
any case law to give more specifiaction where a pvt. company is having
a huge amount of Share Application Money in its b/s and it attracts
scrutiny of the company by statutory authorities.Can a simple noting
in Board meeting is suffiecient to satisfy authorities.
Please clear my point in the given matter.
Thanking You.
On 3/22/11, Vivek Hegde <vivekhe...@gmail.com> wrote:
> Dear Members
>
> I kindly request the members to make use of the past discussions.
>
> I am reproducing a detailed reply by Mr. Mani Srinivasan on the issue.
>
> *Many companies receive deposits in violation of section 58A of the Act and
> the Rules framed there under.Such amounts are classified as share
> application money taking the loophole in the Act ,which as of now, does not
> prescribe any time frame for allotment of shares in the case of unlisted
> public companies and private companies.*
>
> * *
>
> *Many private companies exploit this loophole to keep under wraps the
> violation of section 3 requirements which prohibit acceptance of deposits
> from the public.*
>
> * *
>
> *I raised an objection when a private company wanted to raise share
> application money without increasing the authorised capital. They accepted
> my view only after taking a written opinion from a senior officer retired
> from the MCA.I understand that department has already instructed RoCs to
> examine such cases and launch prosecution if necessary.*
>
> * *
>
> *In another case,at the time of technical scrutiny,RoC officials raised an
> objection on the same issue. There were provisions in the AoA of the pvt.
> company for issue of shares in the agreed ratio between two parties.
> Necessary permission was already taken from RBI for receipt of share
> application money from foreign sources. Since the local parties could not
> bring in their contribution, the shares could not be allotted in the agreed
> ratio. As a result, the share application money received from foreign
> sources was pending allotment for many years. Of course, the authorised
> capital was not an issue in that case. After these facts were explained, Roc
> did not take any action. The Company had to produce all the documentary
> evidence for not alloting the shares.*
>
> * *
>
> *If share application money is received in accordance with law for the
> purpose of meeting the immediate requirements, the company should increase
> the authorised capital within a short time. One should take a stand on the
> facts and circumstances. In such cases, if RoC or any statutory authority
> raises an issue, one should be prepared to explain it to their satisfaction.
> *
>
> * *
>
> *Otherwise, penal provisions under the sections 3 & 58A of the Act as may
> be applicable will follow depending upon the nature of the transaction,
> persons from whom the amounts were collected,etc.*
>
> * *
>
> *In short, substance will prevail over form. If the amount received is
> indeed a deposit within the ambit of section 58A or a prohibited
> transaction within the meaning of section 3 of the Act, mere classification
> under the head of share application money should not be permitted since it
> is illegal to do so.*
>
> * *
>
> *In any event, keeping amounts received as share application money without
> allotment will always invite the attention of statutory authorities.*
>>> > >> B.COM <http://b.com/>(HONS.), M.COM <http://m.com/>, ACS, LLB(P)
>>> > B.COM <http://b.com/>(HONS.), M.COM <http://m.com/>, ACS, LLB(P)
>>> > + 91-94140 44880- Hide quoted text -
>>> >
>>> > - Show quoted text -
>>>
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>
>
>
> --
> *Warm Regards
>
> CS Vivek Hegde,B.com, ACS, CWA
> Company Secretary in Practice
> No. 405, 4th Block, 7th Cross
> Koramangala, Bangalore-560034
> Mob: 09019756940/09900898223*
>
> *
> *