Share Application Money Pending Allotment means the amount received on the application on which allotment is not yet made (pending allotment). … In cases like this, until the shares are allotted, the amount received is shown under the Share Application Money Pending Allotment.
The Pune Income-tax Appellate Tribunal (the Tribunal) recently held that share application money received from shareholders pending allotment could not be characterised as or equated with share capital.
Share application monies are converted to equity capital of an entity after allotment of shares to qualifying applicants. This means that the share application money becomes equity after the completion of the allotment process.
Can application money be used before allotment?
Earlier, under old Companies Act regime, many companies accepted share application money under private placement and utilized the same for the business purpose even without allotment of shares. … Now, Section 42 of the Companies Act, 2013 puts prohibition over the said practice.
Procedure for allotment of shares are as follows:
- Appointment of Allotment Committee: …
- Hold Board Meeting to Decide the Basis of Allotment: …
- Pass Board Resolution for Allotment: …
- Collection of Allotment Money: …
- Arrangement Relating to Letters of Renunciation: …
- Arrangement Relating to Splitting of Allotment Letters:
The minimum share application money is 5% of the nominal value. The money received by the company when it issues shares to the public is known as application money. Allotment is made to the shareholders once the application money is received.
As per the provisions of this section, even private limited companies will not be allowed to receive share application money in cash. They will require opening a separate bank account for receiving share application cheques and will not be able to use that money till they allot the shares.
Share application money cannot be treated as Loan unless Transaction is bogus.
Can application money be deposited in any bank?
Further, in the case of share application money, the companies cannot deal with it in the manner they like. Section 69(4) of the Companies Act, 1956 provides that the application money received is to be deposited and kept deposited in a scheduled bank until the time specified in sub-section (4) of section 69.
What is First Call money?
Introduction. Call money is also referred to as the money at call. It is a short-term loan which is due to be paid immediately in full as and when demanded by the lender. Not similar to a term loan, call money loan does not have a defined schedule of payment and maturity.
What is the rule for refund of application money?
Issuer company allows its securities in a span of 60 days from the date of receiving the application money for such securities and if the company is not able to allot securities within the given time, it has to refund the application money to the subscribers within 15 days after the completion of sixty days.
– The liability of a person whose shares have been forfeited comes to an end when the company receives the payment in full of all such money in respect of shares forfeited. – A member is liable for unpaid calls even after the forfeiture of shares.
Share Application or share allotment or Share capital A/c all are personal accounts as they represent money from the shareholders and when money is due, these are to be debited because of the rule “Debit the receiver”.