Share Application Money Lying with Company since Dec-2013
CS Alpesh Dhandhlya
C Karunakaran Raja
C K Raja
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Manoj Singh Bisht
Alpesh,
This has been a matter of great debate !!
My person view is as follows :
The amount received by the company under the Companies Act, 1956 which was not a deposit under the said act will not be covered under Section 74 of the Companies Act, 2013
- Sec 2 starts with "Unless the context otherwise requires” – The definition of deposit given in sub section (31) of Section 2 of the Companies Act, 2013 is not to be read in context with Section 74 of the Act since the context is different.
- Section 74 – Deposits accepted before commencement of the Act is to be interpreted carefully. Before means before 1st April 2014.
Period upto 31st March 2013 is before commencement of the act and till 31st March 2013, definition of deposit as elaborated in Section 58A read with Acceptance of Deposit Rules, 1975 shall be applicable.
Therefore, the definition of deposit has to be read in context with the period before the commencement and definition as was applicable before the commencement of the act i.e. before 1st April 2014 should be considered.
The definition given under the new Act read with new deposit rules should be referred w.r.t. deposits accepted on and after 1st April 2014.
- Read Preamble to new deposit rules introduced with effect from 1st April 2014 –it says “In exercise of the powers conferred by clause (31) of section 2, section 73 and section 76 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), and in supersession of the Companies (Acceptance of Deposits) Rules, 1975 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules except as respects things done or omitted to be done before such supersession, the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely
Definition of deposits is elaborated in these rules and the definition is effective only from 1st April 2014.
- Read Rule 6 of General Clauses Act – Effect of repeal. Where this Act, or any 1 [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
The only point in favour of filing DPT-4 is the penalty clause. In absence of any clarification from the ministry, companies are in favour of filing details vide DPT 4.
Also, comparison of DPT 3 and DPT 4 will also help you to interpret Section 74 and new deposit rules.
Rakhi Singh
CS Alpesh Dhandhlya
Kiran T
Kiran.T
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Manoj Singh Bisht
Manoj Singh Bisht
Date was inadvertently stated as 31st March 2013, corrected now i.e. 31st March 2014.
This has been a matter of great debate !!
My person view is as follows :
The amount received by the company under the Companies Act, 1956 which was not a deposit under the said act will not be covered under Section 74 of the Companies Act, 2013
- Sec 2 starts with "Unless the context otherwise requires” – The definition of deposit given in sub section (31) of Section 2 of the Companies Act, 2013 is not to be read in context with Section 74 of the Act since the context is different.
- Section 74 – Deposits accepted before commencement of the Act is to be interpreted carefully. Before means before 1st April 2014.
Period upto 31st March 2014 is before commencement of the act and till 31st March 2014, definition of deposit as elaborated in Section 58A read with Acceptance of Deposit Rules, 1975 shall be applicable.
Therefore, the definition of deposit has to be read in context with the period before the commencement and definition as was applicable before the commencement of the act i.e. before 1st April 2014 should be considered.
The definition given under the new Act read with new deposit rules should be referred w.r.t. deposits accepted on and after 1st April 2014.
- Read Preamble to new deposit rules introduced with effect from 1st April 2014 –it says “In exercise of the powers conferred by clause (31) of section 2, section 73 and section 76 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), and in supersession of the Companies (Acceptance of Deposits) Rules, 1975 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules except as respects things done or omitted to be done before such supersession, the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely
Definition of deposits is elaborated in these rules and the definition is effective only from 1st April 2014.
- Read Rule 6 of General Clauses Act – Effect of repeal. Where this Act, or any 1 [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
The only point in favour of filing DPT-4 is the penalty clause. In absence of any clarification from the ministry, companies are in favour of filing details vide DPT 4.
Also, comparison of DPT 3 and DPT 4 will also help you to interpret Section 74 and new deposit rules.
chanchal Garg
On Tuesday, 26 August 2014 13:03:31 UTC+5:30, CS Alpesh Dhandhlya wrote:
Ravi P
1. ALLOTMENT OF SHARES FOR SHARE APPLICATION MONEY RECEIVED BEFORE MARCH 31, 2014
Chairman informed the Board that, due to the time restriction of 2 months introduced in new Companies Act 2013 (which was made effective from April 1, 2014) on allotment of shares from the date of receipt of share application money, company has to allot shares now for the money received before March 31, 2014 as a part of capital structuring plan approved by Board on February 17, 2014. He apprised the board on the compliances requirement under new companies act 2013 and under old companies act 1956. He opined that, provisions of the section 42 or Section 62 of Companies Act 2013 cannot be applied to this allotment due to following reasons:
- Section 42 and section 62 of companies’ act 2013 were not notified as on the date receipt of share application money which was received prior to 31.3.2014.
- Though the allotment are made post 1st April 2014 when section 42 and 62 of companies act 2014 are notified, one of the requirement of section 42(6) of companies act 2014 is that share application money received shall be kept in a separate Bank account. The fact that share application money already received prior to 31.3.2014 cannot be kept in a separate bank account is evident that the said provisions are not applicable for share application money received prior to 31.3.2014.
- Share application money accepted under prior to 31.3.2014 under old companies act 1956 and pending for allotment as on 1st of April 2014 need not be complied with section 42 and 62 of new companies act 2014 since the said amount not received and held pursuant to the offer made under new act.
- Due to the above said reasons, the Board is of opinion that, the company has to follow what is applicable under erstwhile companies act 1956.
He informed the board that, Article ....of Articles of Association of company allows the directors to allot shares. Board has discussed in length on the above issues, and taken note of the same and unanimously passed the following resolution:
“RESOLVED THAT ............ equity shares of Re. 1/- each in the share capital of the Company be and are hereby allotted at par to below-mentioned allotees in physical form
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Name of shareholder |
No. of Equity Shares of Rs.1/- each fully paid-up |
Distinctive Numbers |
Share Certificate Number |
Folio No. |
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|
|
|
From |
To |
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|
|
|
|||||
“FURTHER RESOLVED THAT the equity shares certificate of the company in respect of above shares be issued to the aforesaid people under the common seal of the company and the same be signed by any two directors of the Company.”
“RESOLVED FURTHER that any director of the Company be and is hereby authorized to file the return of allotment pursuant to section 75 of the erstwhile Companies Act, 1956 with the Registrar of Companies concerned in the prescribed form and to do all incidental Acts and deeds in this connection to give effect to the resolution.”
CS Alpesh Dhandhlya
CS Simranjeet Singh
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chanchal Garg
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CS Simranjeet Singh
chanchal Garg
On Tuesday, 26 August 2014 13:03:31 UTC+5:30, CS Alpesh Dhandhlya wrote:
CS Simranjeet Singh
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CS Alpesh Dhandhlya
chanchal Garg
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Saurav Kumar
What will be the treatment of an amount received as an application moneyfrom direcor of comapany or Body corporate??
is dpt required to be filed with roc.
Thanks in advance
Saurav
Student
Rakhi Singh
Saurav Kumar
But there is an exception for amt received from director in term of deposit.i want to know do we required to file dpt 4 in this case.we dnt want to allot share.
Thanks in advance
Saurav
CS Alpesh Dhandhlya
Ravi P
1. CAPITAL STRUCTURING (back dated to February or March 2014) (please make necessary changes required as per your company's requirement)
Chairmen informed the Board that, Companies Act 1956 and the Articles of Association of the company allows the Board on capital structuring & raise the paid up capital of the company by following certain procedures. The provisions of section 81 of Companies act 1956 on “further issue of shares” are not applicable to private limited companies. He happily noted that Company’s effort to attract investments/funds to run the business activity till next 10~11 months has yielded result. He informed the board that, following persons have agreed/consented in writing to invest in the capital of the company on or before the end of this calendar year 2014 & agreed to the company’s capital structuring plan & terms & condition of allotment at par or at premium as decided by board. Their investment commitment amount and agreed number of shares & conditions of allotment are furnished below:
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Sl.no |
Name |
Promoter/other |
Investment Amount (INR) |
Remarks on allotment to be done by company
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|
1 |
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.....Lakh shares at par |
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|
|
He also informed the Board that, among the above, some have already transferred the funds and others will transfer funds either as lump sum amount or in installments on or before the end of this calendar year 2014. He apprised the board that with the above infusion of funds, company can run the operation till ............... and by that time company has to look for some other investors to invest in the capital of company. Chairman sought the approval of board on the same. After discussion it was unanimously:
“RESOLVED THAT the approval of the board be and hereby granted to the proposed “capital structuring” and proposed allotment of shares to the following persons against the investment amount agreed to be contributed by them for allotment at par or at premium either as partly paid or as fully paid, as the case may be, depending on the circumstances prevailing at the time of allotment at future date
Sl.no | Name | Promoter/other | Investment Amount (INR) | Remarks on allotment to be done by company
|
1 | .....Lakh shares at par | |||
“RESOLVED FURTHER that the approval of the board be and hereby granted for the infusion/investment of funds by abovesaid persons which are in various stages of implementation can be either as lumpsum amount or in installments which needs to be pumped in/ completed by them on or before the end of this calendar year 2014.”
“RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board be and is hereby authorized to do all such acts, deeds, matters and things and to give such directions as may be necessary or expedient, and to settle any question, difficulty or doubt that may arise in this regard as the Board in its absolute discretion may deem necessary or desirable and its decision shall be final and binding.”
ALLOTMENT OF SHARES IN THE CURRENT DATE:
Chairman once again brought to the notice of board on the resolution passed on February...., 2014 on capital structuring and the investment/fund infusion commitment given by specified shareholders/investors and said that Companies act 1956 allowed the board of private limited companies to structure the capital. He also informed the board that some shareholders have already pumped in the agreed investment amount before March 31, 2014 and others are going to pump in either as lump sum amount or in installments over a period of time and company has the obligation to allot shares as agreed. He said that the resolutions passed by board under the erstwhile companies act 1956 are valid even though the Companies Act 2013 are silent due to following reasons:
· Section 6 General clauses act 1987 says that any enactment made shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed”. In other words it protects the obligation vested on company on account of resolution passed on February ....., 2014
· Section 465(2)(b) of Companies Act 2013 (yet to be notified) also protects the resolutions passed in erstwhile Companies act 1956 which is reproduced below:
· (b) subject to the provisions of clause (a), any order, rule, notification, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done under or in pursuance of any repealed enactment shall, if in force at the commencement of this Act, continue to be in force, and shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act
* Circular issued by MCA bearing no.32/2014 dated 23rd July 2014 while clarifying the transitional period for resolutions passed under erstwhile companies act has upheld the validity of resolutions under erstwhile companies act upto 1 year
Due to the above said reasons, company can follow the procedures mentioned in erstwhile companies’ act 1956 to implement the decision of board taken in a duly held meeting on ..th February 2014.
. Chairman requested the Board to consider the allotment of shares to him. After discussion it was:
CS Alpesh Dhandhlya
Dear Experts,
Following Article has been published in the CLR...
A brief analysis of the provisions of Investor Education and Protection Fund and the rules made there under. As the companies are receiving notices from ROC for non-filing of Form5 INV the following are the compliances required for avoiding the non-compliance.
The Investors Education & Protection Fund (IEPF) rules make it mandatory to file Form 5 INV in the following cases:
(a) Amount of Unclaimed and unpaid dividend
(b) Amount of application moneys received and due for refund
(c) Amount of matured deposits
(d) Amount of matured debentures
(e) Interest accrued on the amounts referred to in clause (a) to (d) above
Rule 3 of IEPF (Uploading of Information regarding unpaid and unclaimed amount lying with companies) Rules, 2012, defines this. Every company shall, within a period of 90 days after holding its AGM or the date on which it should have been held and every year thereafter till completion of 7 years, identify the unclaimed amounts, separately furnish and upload on its website and also on Ministry’s website the details of the said amount. These details shall be furnished by way of filing of Form 5 INV separately for each year containing the following information:
- Names and last known addresses of the persons entitled to receive the sum;
- Nature of the amount;
- Amount to which each person is entitled;
Analysis:
- Due for Payment was not define under the Companies Act, 1956 but now it has been expressly defined under the Companies Act, 2013 and as per the provisions of the new act, the share application money shall be refunded within 15 days from the expiry of 60 days from the date of receipt of application money.
- Amount to IEPF shall be transferred only after the expiry of 7 years from the date it becomes it.
- If such money has already been refunded then the form is not required to be filed with the Registrar of Companies.
- In the cases where such money is refunded or allotted before the commencement of the Act then Form INV 5 has to be filed with the Registrar of Companies and Return of allotment in the case of allotment of shares.
Conversion of share application money pending allotment before 31.03.2014:
- The amount also cannot be converted to loan as the Companies Act, 2013 does not permit the conversion or adjustment of such money and Company has to mandatorily refund that application money within 15 days of the date of completion of sixty days.
Following Article has been published in the CLR...
A brief analysis of the provisions of Investor Education and Protection Fund and the rules made there under. As the companies are receiving notices from ROC for non-filing of Form5 INV the following are the compliances required for avoiding the non-compliance.
The Investors Education & Protection Fund (IEPF) rules make it mandatory to file Form 5 INV in the following cases:
(a) Amount of Unclaimed and unpaid dividend
(b) Amount of application moneys received and due for refund
(c) Amount of matured deposits
(d) Amount of matured debentures
(e) Interest accrued on the amounts referred to in clause (a) to (d) above
Rule 3 of IEPF (Uploading of Information regarding unpaid and unclaimed amount lying with companies) Rules, 2012, defines this. Every company shall, within a period of 90 days after holding its AGM or the date on which it should have been held and every year thereafter till completion of 7 years, identify the unclaimed amounts, separately furnish and upload on its website and also on Ministry’s website the details of the said amount. These details shall be furnished by way of filing of Form 5 INV separately for each year containing the following information:
- Names and last known addresses of the persons entitled to receive the sum;
- Nature of the amount;
- Amount to which each person is entitled;
Analysis:
- Due for Payment was not define under the Companies Act, 1956 but now it has been expressly defined under the Companies Act, 2013 and as per the provisions of the new act, the share application money shall be refunded within 15 days from the expiry of 60 days from the date of receipt of application money.
- Amount to IEPF shall be transferred only after the expiry of 7 years from the date it becomes it.
- If such money has already been refunded then the form is not required to be filed with the Registrar of Companies.
- In the cases where such money is refunded or allotted before the commencement of the Act then Form INV 5 has to be filed with the Registrar of Companies and Return of allotment in the case of allotment of shares.
Conversion of share application money pending allotment before 31.03.2014:
- The amount also cannot be converted to loan as the Companies Act, 2013 does not permit the conversion or adjustment of such money and Company has to mandatorily refund that application money within 15 days of the date of completion of sixty days.
srinivas jakkani
My Question is:
X Company has received the amount of Rs. 7.00 Crs from 6 contributors during the financial year 2012-13 and has been showing it in the books of accounts as share application money pending allotment from 31.03.2013. New act is throwing lot of challenges in interpretation. Now the Companies Act 2013 has introduced with the important changes pertaining to the share application money.
Ø The company had neither allot the shares to the subscribers before the due date i.e., 30.05.2014 (60 days time given by the New Companies Act, 2013) nor repaid the same to the subscribers before 14.06.2014 (within 15 days from the due date).
Ø The company has Authorized share capital as on 31.03.2014 of Rs.7,00,00,000 and the paid-up share capital of Rs.6,91,32,900 on the same date.
Ø To support to allot the shares to the subscribers within the due date i.e., 30.05.2014, the company has not increased the Authorized share capital and the same has done on 11.08.2014(EGM) by increasing the Authorized Share capital from Rs.7.00 Crs to Rs.14.00 Crs and filed the eforms MGT-14 and SH-7 with ROC but held pending for approval (not yet approved i.e., filed the above forms on 28.08.2014).
Ø after the due date the share application amount pending will come in the definition of deposit as per New Act and needs to be repaid within 1 year from commencement of the act i.e., 01.04.2014 and has to be filed with ROC the eform DPT-4 by attaching the Auditors Certificate (Acceptance of Deposits).
What are the consequences can be occur & solutions can be made pertaining to the above queries…..please suggest me.
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Srinivas Jakkani M.Com, MBA, CS(Professional)
Secretarial Executive
SEA GOLD INFRASTRUCTURE LIMITED
Hyderabad - 500 033
Mobile: 91-9032023056/ 9010472431
Email: srini...@yahoo.com
srini...@gmail.com
csjakkanisrinivas@gmail. com