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 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
||Allotment within 60 days
||Allotment shall be done within 60 days of receipt of application money.
||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.
||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.
||In case of subscribers to memorandum
||Within 2 months from the date of incorporation
||In case of allotment of shares
||Within 2 months from the date of allotment
||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
||In case of allotment of debentures
||Within 6 months from the date of allotment
 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.