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Time Limits for Allotment and Issue of Share Certificates

February 1, 2018     by bsamrishindia.com

 “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

ALLOTMENT OF SHARES TO NON-RESIDENT

  • W.e.f 7th November, 2017, FDI Regulations have been aligned with the time limit specified in Companies Act, 2013. Therefore, even in cases of money recieved by way of inward remittance towards share capital, shares must be allotted within 60 days of its receipt.

 [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


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

  1. ABC is a private limited company. The Company is incorporated in december 2017. Upto march 2018, no meetings have been held. Bank account has not been opened and hence share money has not been called upon. Both the shareholders are non resident. What is the course of action now and how do we finalize the accounts for march 2018.

  2. After Conversion from Pvt Ltd to Ltd, Unsecured Money taken by Company before the time of conversion can be treated as Deposit or Consider as Unsecured Loan?

  3. Can you please tell me in which act/rule 30 days time limit for payment of stamp duty after issueance of share certificate is mention?

    1. The legal provisions for payment of Stamp Duty is covered under section 3 and 10 of the Indian Stamp Act, 1899 and the time limit of one month after execution of instruments for payment of stamp duty is covered under first proviso of section 32 of the Act.For further information on the same you ccan visit our blog : Payment of Stamp Duty on Issue of Share Certificates in NCT of Delhi

  4. can excess share application money received form the directors be treated as unsecured loan in case of private company?

    1. The money received from the directors against the share application money shall be used to make allotment within 60 days of receipt of money, in case of failure to so the amount shall be refunded within 15 days. If the Company fails to comply with the aforesaid provisions the amount shall be repaid with an interest of 12% p.a.
      Furthermore, if the amount is not repaid within 60 days the same shall be treated as deposit pursuant to Rule 2 of The Companies (Acceptance of Deposit) Rule 2014.

  5. i have not received shares if Emami infra ltd. post merger with Zandu realty.
    I was holding 27shs. of Zandu realty on RD date 25/05/2018

    1. You were authorised to get the shares of Emami Infra Limited in accordance to the exchange ratio decided. Now, you need to contact the compliance officer of the scheme of merger for this issue.
      The RTA to the issue was Intime Spectrum Registry Limited, The contact person shall be Mr. Awani Thakkar (+91 22 2596 0320)
      Name of Compliance Officer : Mr. Arun Kumar Joshi Tel No+91-033- 66136264

    1. As per Sec 56(4) of Companies Act, 2013, the share certificates to be issued within 2 months from the date of allotment. The Stamping is to be done within 30 days from the date of issue of share certificate.

  6. Company incorporated on 18-12-2017. The person who did the franking delayed and stamp duty for share certificate is paid on March 1. Does this mean there is a penalty?

    Thanks.

    1. As per Section – 56(4) of the Companies Act, 2013 the Share Certificates is to be issued within 2 months from the date of incorporation and franking is to be done within 30 days from the date of issue of share certificate. Now, in your case, if the Share certificates have been issued on or after 01.02.2018 but before 17-02.2018 and you have get franking done on March 1 then it is well in the limit.

    2. As per Section – 56(4) of the Companies Act, 2013 the Share Certificates is to be issued within 2 months from the date of incorporation and franking is to be done within 30 days from the date of issue of share certificate. Now, in your case, if the Share certificates have been issued on or after 01.02.2018 but before 17-02.2018 and you have get franking done on March 1 then it is well in the limit.

  7. ABC Private Limited is incorporated on 27.04.2017. The First Board meeting was held on 29.04.2017.

    Bank Account opened for the new Company on 18.05.2017. Subscriber money deposited in the bank on 17.06.2017.

    However the share certificates issued to the subscriber is dated 29.04.2017.
    Request you to please advise whether the share certificates ca be issued in the first BM without receipt of subscriber money since the subscribers are anyway members from inception?

    Or

    whether the share certificates needs to be revised?

  8. Company incorporated on 18-12-2017. The person who did the franking delayed and stamp duty for share certificate is paid on March 1. Does this mean there is a penalty?

    1. As per Section – 56(4) of the Companies Act, 2013 the Share Certificates is to be issued within 2 months from the date of incorporation and franking is to be done within 30 days from the date of issue of share certificate. Now, in your case, if the Share certificates have been issued on or after 01.02.2018 but before 17-02.2018 and you have get franking done on March 1 then it is well in the limit.

  9. Hello Sir,
    I have a query as below:-
    I have got a company incorporated on 13.02.2018 with authorized and paid up capital of Rs.1 crore. The shareholders are 85% (a foreign company) and 15% (an Indian resident individual).
    Now, what are the due date of compliances under Companies Act, 2013 and FEMA to be complied by the newly Incorporated Company?
    a. To receive money as share capital from foreign and Indian shareholders?
    b. To allot shares to foreign and Indian shareholders?
    c. To issue share certificates to foreign and Indian shareholders?
    d. To file ARF with RBI?
    e. To file FCGPR with RBI?
    Please help me in understanding this.
    Nitesh

    1. There is no specific provision under Companies Act which explicitly provides for the time period under which the subscription money shall be received, but according to section 10(2) of Companies Act 2013 ) “All monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company” and the same shall, be paid.

      Moreover ARF shall be filed within 30 days of receipt of money from the foreign shareholders and FC-GPR shall be filed within within 30 days of allotment of capital instruments.

  10. What remedy is available if there is any delay in issuing share certificate. Can we do franking on share certificates as on date

    1. As per Section 56(4), the share certificate should be issued within 2 months of allotment. If not allotted, penal provision as per Section 56(6) are applicable. As far as franking is concerned, it is to be done within 30 days from the date of issue of share certificates, otherwise delay filing penalty shall be applicable. Furthermore, franking is allowed only if the amount of stamp duty is upto INR 5,000/- .

  11. the private company is incorporated on 12/12/2017 the bank account is not opened within 60 days of incorporation so subscribtion money recived is recived after incorporation
    My question is that weather share certificate to the subscriber issued after the reciept of the money . or the sare certificate issued is to be issued within 60 days of incorporation without reciept of share application money
    kindly reply for the issue .

    1. In accordance to Section 56(4) every company shall deliver the certificates of securities allotted within a period of two months from the date of incorporation. There is no timeline prescribed for receipt of share subscription money at the time of incorporation.

  12. Hello Sir,

    I had recently applied for the right issue of Sumeet Industries for 200 shares which I was entitled. But was not allotted a single share. How this is possible. Wasnt I supposed to get the shares in 7:3 ratio which was declared in right issue. Please help me in understanding this.

    Thanks,
    Pramod

    1. TIME LIMIT FOR ALLOTMENT
      Allotment shall be made within 60 days of receipt of application money.
      BUT IF SHARES ARE NOT ALLOTTED within 60 days then application money to be refunded within next 15 days. If not refunded within 15 days then interest shall also payable @12% after the expiry of 60 days, and It shall be treated as a public deposit after the expiry of the said 15 days.
      TIME LIMIT FOR ISSUE OF SHARE CERTIFICATES
      Share certificates to be issued within a period of 2 months from the date of allotment of shares. If you were a shareholder on the record date as mentioned in the offer document, you are entitled to the shares

  13. in case of ESOP Trust incorporated for ESOP allottment by a listed entity for its overseas employees, does the trust have an obligation to refund any excess money received as per FEMA or it can hold these funds to be used for future allottments. This is more related from the trust compliance perspective. Thanks in advance.

    1. We have not dealt with such situation in case of Trust. Our experience with excess amount received in cases of FDI is stated as below. It depends on the quantum of amount. There are no clear guidelines available, but RBI do not insist on refund of excess money received if the amount is nominal and a waiver letter is obtained from the allottee.

  14. 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. “

  15. 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.

  16. 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

  17. 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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