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anju jain (lawyer)     03 June 2009

section 94 and 97 of Companies Act

Can share application money shown in balance sheet can be more than Authorised Capital?



 3 Replies

Guest (Guest)     03 June 2009

 See, 1) How can comopany receive application money for shares to the tune exceeding Auth Cap?

2) Co is just receiving this Appli Money. It can raise its autho cap and then make allotment.

These r d 2 issues.

But  i would not see any difficulty if so especially in case of a Private Company. I m not sure on Public Company but i feel even in that case there would b no big issue.

Contrary views always invited.

 

Regards,

PC Agrawal (PCS)     06 June 2009

When co. issues shares - it is invitation to offer.

When application for shares is made - it is an offer.

When allotment of shares is made - it is an acceptance and contract is complete.

If the issue is not within authorised share capital, invitation to offer is beyond the powers of the company and hence it should not be accepted.  In case of public issue, public companies are required to mentioned authority for the issue in the prospectus.  Same principle is legally applicable to private companies also.  However, in practice we find many companies accepting share application money beyond authorised share capital which is legally not correct.  In some cases ROC has treated such money as 'deposit' u/s 58A of Companies Act and issued notices for prosecution.

 

 

1 Like

CS Pooja (Company Secretary)     06 June 2009

Marvellous answer, Mr. Agarwal...

1 Like

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