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Time Limits for Allotment and Issue of Share Certificates

September 26, 2016     by Nupur Singhal

 “Allotment of shares” is used to indicate “… the creation of shares by appropriation out of the unappropriated share capital to a particular person. Issue of shares is something distinct from allotment and is some subsequent act whereby the title of the allottee becomes complete.

There are certain restrictions w.r.t time lines within which securities are to be allotted after the company has received Share Application money. Law also provides for time limits within which share certificates are to be issued. We have tried to summarize the same in this blog.

In terms of Section 179, the power to issue securities have been vested on the Board of Directors of the company by way of passing resolution at meetings of the Board.

Present law[1] defines the time limits for allotment of securities and issuance of security certificates in different situations. These have been summarized as follows:-

Allotment of Securities

S. NO. PARTICULARS DETAILS
1. Allotment within 60 days Allotment shall be done within 60 days of receipt of application money.
2. If not allotted within 60 days, refund in next 15 days If allotment is not done within 60 days then refund the whole application money within next 15 days.
3. If not refunded within 15 days ·         Refund application money along with interest @12% p.a. after the expiry of 60 days, and·         It shall be treated as a public deposit after the expiry of the said 15 days.

Issue of Share Certificates

Section 56(4) of the Companies Act, 2013 contains the provisions related to time limits for the delivery of the certificates of all securities allotted, transferred or transmitted.

S. NO. PARTICULARS DETAILS
1. In case of subscribers to memorandum Within 2 months from the date of incorporation
2. In case of allotment of shares Within 2 months from the date of allotment
3. In case of transfer or transmission of securities Within 1 month from the date of receipt by the company of the instrument of transfer or intimation of transmission
4. In case of allotment of debentures Within 6 months from the date of allotment

[1] Section 56(4) of the Companies Act, 2013, Regulation 3.4.1 of FDI Regulations read with FEMA, Section 46(2) of the Companies Act, 2013, and Companies (Acceptance of Deposits) Rules, 2014

TIME LIMITS IN CASE OF WHOLLY OWNED SUBSIDIARY OF FOREIGN COMPANY

  • As per FDI Regulations read with FEMA, share must be allotted against share application money received from non-resident within 180 days of its receipt.
  • Whereas, as per Rule 2(c) (vii) of the Companies (Acceptance of Deposits) Rules, 2014, any amount has been received for the purpose of subscription of shares and shares are not allotted within 60 days of its receipt then same shall be refunded within 15 days from the expiry of 60 days otherwise same shall be treated as deposits.

In the absence of any clarification given by  in our opinion, stricter provisions of the Companies Act shall apply. Thus, in case of a wholly owned subsidiary of a foreign company, the shares shall be allotted within 60 days of the receipt of application money.


10 thoughts on “Time Limits for Allotment and Issue of Share Certificates

  1. A private limited company is incorporated on 20.03.2017. However it has not deposited the promoters share application money till date. Now the promoters wants to start the business and wants to deposit their amount in the current account of the bank. Can you please guide what should be done?

    1. “The companies Act, 2013 doesn’t have an express provision which specifies a particular time limit requiring subscribers to the memorandum to pay subscription money.
      However as per section 2(55), subscribers are treated as the Members of the company even though they are have not paid subscription money.
      Shares are deemed to be allotted to the subscribers on the date of incorporation. As per section 56(4)(a) of Companies Act 2013, every company shall deliver the certificates of all securities allotted within a period of two months from the date of incorporation, in the case of subscribers to the memorandum.
      In this case, the promoters can deposit the money and start the business. “

  2. Hi Sir,

    Kindly let me know Penalties or procedure for delay in allotment of share i.e. allotted the shares on 64th day of inward remittance. Actually it should be allotted with in 60 days.

    1. As per FDI rules read with FEMA, share must be allotted against money received from non-resident within 180 days of its receipt, so allotment of shares made on 64th day is within time limit. Also, as per Companies (Acceptance of Deposits) Rules, 2014 [2(1)(c)(ii)] if securities are allotted under the provisions of FEMA, 1999 then it will not be termed as deposit so here no penalty will arise under this provision as well. Further if the company has allotted securities on private placement basis than penalties under section 42 shall attract.

  3. We have recently incorporated a company with a subscribed captial of Rs.2,00,00,000 (by the promoters). I need a clarification from you in the following matter:
    Is the whole amount of 2 Crores to be paid up before issuance of share certificates or can it be paid over a peroid of time after the said period of two months.
    I have even gone through the Act,but I have not come across any condition stating that the entire amount has to be paid up before issuance of share certificates.
    Please help us out from this dilemma.

    1. Subscription money should be penetrated in the Company at the earliest possible. As per Section – 2(55) of the Companies Act, 2013, the subscriber to the Memorandum of the Company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members and as per the provisions of Section 56(4) of the Companies Act, 2013, every company shall deliver the share certificates to its subscriber within 2 months from the date of incorporation whether money received or not from the subscribers. There is no provision in the Companies Act, 2013 regarding the maximum period for bringing Subscription Money by the Subscriber to the MOA. As per Section 10(2), amount pending from subscriber shall be treated as Debt till its payment

  4. sir,
    If we do not repay share application money before 31st march 2016, how we can show at the end of 31st march 2016 and we will issue share in 2016-17. Please guide me.
    Thanks in advance

    1. The allotment of security shall be made with in 60 days of receiving share application money.if not then refund the share application money within 15 days of completion of 60 days .Also, if the shares are not allotted within 60 days, the share application is classified as deposits.

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