Issue of share certificates to Subscribers- Query

[Mridula .P.Thomas]

Dear All,

A Company has been incorporated on 18-Mar-2010. But till now, they haven't issued share Certificates to the Subscribers of Memorandum. My query is whether time limit specified u/s 113 is applicable for issue of share certificates to the subscribers.

Sec 113 says share certificate has to be delivered within three months after the allotment of shares. But in my opinion, issuing shares to subscribers will not come under the purview of  "Allotment". So, can we say that time limit prescribed under Sec 113 is not applicable in this case?

If it is so, then what else can be done in this situation? Please advice.

Thanks and Regards,
Mridula

[Vivek Hegde]

Dear Mridula

The provisions of Section 113 is applicable to issue of shares to subscribers to MOA. 

Issue of shares to subscribers will be "deemed allotment". 

Best option would be, you can pass a Board Resolution for allotment of share and issue share certificates within 3 months.

Vivek

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CS Vivek Hegde,B.com, ACS, CWA
Company Secretary in Practice
No. 405, 4th Block, 7th Cross
Koramangala, Bangalore-560034
Mob: 09019756940/09900898223

[Mridula .P.Thomas]

Dear Mr. Vivek,

Thank You for your reply. But what about the payment of stamp duty in share certificates? pls advice.

Mridula

[Vivek Hegde]

Dear Mridula

Let me clarify:

Record Board Meeting somewhere in December, 2010 (it need not be the first BM)

Stamp the share certificates and Issue it now.

Vivek Hegde

[Bharat Hegde]

 

Dear Vivek,

 

Sorry to differ from your views.

 

The Section 41 reads as below:

DEFINITION OF "MEMBER".

(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of a company, and on its registration, shall be entered as members in its register of members.

 

From the above, we can say that subscribers to memorandum are the members of the Company from the date of its incorporation and the shares subscribed by them are deemed to have been allotted on the date of its incorporation. Then share certificates have to be issued within 3 months from the date of incorporation.

 

Is it allowed to show the allotment of shares to subscribers in a subsequent board meeting and issue the certificates within 3 months from the date of the board meeting?

 

The subscribers to memorandum are supposed to bring the money against shares subscribed by them immediately after incorporation of the Company. Even if they fail to bring the money, they are still members and holders of the shares subscribed by them. The amount due on the shares subscribed will be treated as the debt due to the Company under Section 36(2).

 

Kindly correct me, If I am wrong.

 

Regards,

Bharat

 

Bharat Hegde

Company Secretary

Bangalore

Cell: 9482016707

[ankit misra]

Dear Bharat,

I m also agree with you. Since, Subscriber to the MOA are deemed to be the Member of the Company, hence they are excluded fronm the perview of Section 113 of Cos. Act, 1956.

regards,

Ankit Misra

[Vivek Hegde]

Dear Bharat

Your point is well noted. The moot question is....

1. Is it correct to allot the shares to subscribers, pending share application money (in the current scenario so many foreign companies are forming subsidiaries in India. If we take incorporation date as allotment (deemed) date we have to file Form FCGPR within 30 days (even before the share application money being received) How will you get FIRC, KYC etc?. It doesn't look logical.

Vivek Hegde  

[Vivek Aggarwal]

Dear Bharat

I differ with your views a little bit. As per Section 69 of the Act, no allotment of shares shall be made unless minimum subscription has been received which is 90% of the issused capital.

The subscribers to the MOA are required to bring money immediately after incorporation otherwise allotment of shares cannot be made to them.

So your statement that even if they fail to bring money, they will be members is not correct.

 

Regards
CS Vivek Aggarwal

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From: Bharat Hegde <bharath...@gmail.com>
To: csmy...@googlegroups.com
Sent: Friday, 11 February 2011 7:49 PM
Subject: Re: [CSMysore] Issue of share certificates to Subscribers- Query

[Vivek Aggarwal]

Dear Vivek

Well said. This is a practical problem faced by many people.

 

Regards
CS Vivek Aggarwal

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From: Vivek Hegde <vivekhe...@gmail.com>
To: csmy...@googlegroups.com
Sent: Saturday, 12 February 2011 11:44 AM

Subject: Re: [CSMysore] Issue of share certificates to Subscribers- Query

Dear Bharat

Your point is well noted. The moot question is....

1. Is it correct to allot the shares to subscribers, pending share application money (in the current scenario so many foreign companies are forming subsidiaries in India. If we take incorporation date as allotment (deemed) date we have to file Form FCGPR within 30 days (even before the share application money being received) How will you get FIRC, KYC etc?. It doesn't look logical.

Vivek Hegde  

On Sat, Feb 12, 2011 at 10:51 AM, ankit misra <ankit...@gmail.com> wrote:

Dear Bharat,

I m also agree with you. Since, Subscriber to the MOA are deemed to be the Member of the Company, hence they are excluded fronm the perview of Section 113 of Cos. Act, 1956.

regards,

Ankit Misra

On Fri, Feb 11, 2011 at 7:49 PM, Bharat Hegde <bharath...@gmail.com> wrote:

[Bharat Hegde]

Dear Vivek,

 

I do agree with your views regarding the difficulty in filing FCGPR if the subscription money is not brought in within 30 days from the date of incorporation. In such case we would require to file the FCGPR within 30 days from the date of inward remittance ( deeming the date of inward remittance as the date of allotment). Here also, I believe, we cannot avail the time period of 180 days available for allotting the shares and filing the FCGPR within 30 days of the date of allotment.

 

But FEMA Regulations are the different issue.  Under the provisions of the Companies Act, in the case of subscribers, no application and allotment is necessary to become the members. Their membership is beyond revocation. The Company can enforce the payment of subscription money from the subscribers even after they transfer the shares.

 

Further, after the commencement of Companies (Amendment) Act, 2000, now it is necessary for the subscribers to subscribe the minimum capital requirement to register the company, One Lakh or Five Lakhs as the case may be.  On registration, the company is deemed to have the minimum capital, whether the subscription money is received or not. The unpaid portion of the subscription money will be considered as the debt due to the Company and not the calls in arrears.

 

Regards,

Bharat

[CS.M.Alagar]

There is no specific regulations which says the subscribers should bring initial subscriptions amount immediately upon incorporation of the company. Provided the money should be brought in before first financial year closure and allotment can be done upon such receipt of money..

If the subscribers are nonresident, the company can follow the normal FCGPR procedure...

Thanks, CS.M.Alagar Sent from BlackBerry® on Airtel

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From: Bharat Hegde <bharath...@gmail.com>

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Date: Sat, 12 Feb 2011 13:00:21 +0530

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