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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


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

  1. hi, during incorporation I transferred little bit extra money in bank account on top of the actual amount of paid up capital as per moa. will that be problem? how would i account for it in books

    1. Per of Rule 2(1)(c ) (vii) of Companies (Acceptance of Deposit) Rules 2014, share application money against which allotment is not made within 60 days from acceptance or is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.

      For future reference, you can inform your AD Bank before making the transfer of money that any amount in excess of the amount for which shares are subscribed, shall be returned back to the remitter bank at time of credit.

  2. In case of newly incorporated company , can the company take the approval from board and shareholders w.r.t further increase of authorized share capital without filing INC 20 A?

    1. A Company cannot commence its business operations or exercise borrowing powers unless a declaration under INC-20A is filed with the Registrar. Further, please note Form SH-7 cannot be filed unless Form INC-20A is approved. Hence, in case your company is ready to soon file INC-20A, we suggest to pass resolutions for increase of authorised capital subject to approval of INC-20A and thereafter first submit INC-20A and then proceed for SH-7

  3. If a body corporate is offered 11,000 equity shares by private company under private placement basis can such body corporate subscribe for only 10,000 equity shares and refuse to subscribe the balance ?

    1. Private placement means any “offer” or invitation to subscribe or issue of securities to a select group of persons by a company. An offer is complete only when accepted and becomes binding only with respect to the said acceptance and not more than that. Thus, in the case, it is at the discretion of the foreign company to apply to entire 11,000 shares or accept and apply only for 10000 shares.

  4. Hello Sir,
    If a company could not allow shares with 60 days n also did not refund the amount, but that was due to unavoidable reasons, is there a provision to not consider that period and only when later the shares are allotted, from that date the dividend is provided to the respective shareholders.
    Is there any case law regarding this.

    1. Dear Sir,

      Pursuant to the provisions of the Companies Act, 2013 if the shares are not allotted within 60 days from the date of receipt of application money, the amount shall be refunded within next 15 days, failing which, refund application money along with interest @ 12% p.a.

      In your case, since there is no exemption under the Act, it is advisable to refund the application money along with interest and make an offer again.

      Per our limited research, we could not find any relevant case law citing a similar situation.

  5. A company incorporated on 19/10/2019 with Rs.1,00,000 paid up share capital. But bank account opened and amount was brought in only on 27/04/2020. How can we show share capital in the Balance Sheet as on 31.03.2020 ?

    1. Dear Sir,

      The shares to the members are deemed to be allotted from the date of incorporation, hence, share capital comes into existence from the date of incorporation. Further, pursuant to the provisions of Section 10(2) of the Companies Act, 2013 all monies payable by any member to the company under the memorandum or articles shall become a debt due from him to the company w.e.f. from the date of incorporation. This shall fall due from the date of incorporation.

      Hence, the amount of subscription money due from the subscribers shall be termed as ‘debt due to the company ‘ i.e Debtors under the Asset side of balance sheet and the Share Capital (pending for payment) on the Liabilities side of the Balance Sheet.

      Please be apprised that the subscribers are liable to deposit the subscription money within 180 days of incorporation of the company

  6. My company is willing to issue shares to a foreign company since the date of incorporation. At the time of completing the allotment formalities with RBI is our company eligible for preparing a valuation report to comply with pricing guidelines of FEMA?

    1. Per Rule 21 of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019, the issuer company is required to obtain a valuation report for valuation of equity instruments to be issued to foreign companies from a chartered accountant or a merchant banker or cost accountant.

      However, as per the provisions of Companies Act, 2013 valuation certificate from a Chartered Accountant is sufficient if the shares are being issued under rights issue. In any other case valuation is to be obtained from a registered valuer.

      Accordingly, you are required to obtain a valuation report while complying and submitting documents with RBI.

  7. Sir Company has alloted the shares but has not filed eForm PAS3 then in that case can company Come with the new issue is their any restriction for fresh issue

    1. E-Form PAS-3 is required to be filed as per Section 39(4) of the Companies Act, 2013 Read with Companies (Prospectus and Allotment of Securities) Rules, 2014 within 30 days of allotment of Securities along with the fee as specified in the Companies (Registration Offices and Fees) Rules, 2014.
      If company fails to file the Form PAS-3 within 30 days from the date of allotment then the company and the officer in default shall be held liable for a penalty of INR 1,000 for each day during which defaults continues or INR 1,00,000, whichever is less . Thus, it is advisable to complete the filings of the earlier right issue and come up with a new offer.

  8. A private company incorporated in Dec 2019 but INC-20A (Declaration for Commencement of Business) was filed in Feb 2020.

    Is the company required to prepare first set of accounts upto 31.03.2020?

    As per the Act, first financial year can be taken for a period upto 15 months. I am not sure whether this period of 15 months must be counted from the date of incorporation or from the date of commencement of business?

    1. According to section 2(41) of Companies Act, 2013, where a company is incorporated between 1st January to 31st March of any year, its first Financial Year will be ending on 31st March of the following year. Since your company is incorporated in December, 2019, i.e. not falling in the above period, your company’s first financial year will be from December, 2019 (Date of incorporation of your company) to 31st March, 2020.

      Further, section 10A of the Companies Act, 2013, requires only a declaration by the director of the company that it has received subscription money and has a valid registered office. It has no relevance in calculating the period of the financial year of your company.

  9. I have recently joined a company which has not issued any share certificates to its shareholders since incorporation in 2006. Its a private limited closely held company. We wanted to comply with the all the secretarial compliance now. However how do I issue share certificates now? Who will sign them?

    1. As per Section 56 of the Companies Act, 2013 every company is required to issue share certificate within 2 months from the date of allotment of shares. However, if a company fails to comply with the above provisions then company and Director shall be punishable with fine as maybe prescribed (in the Section 113 of the erstwhile act i.e Companies Act, 1956 the timelines for issuance of share certificates was also same).

      In the light of the above provisions, share certificates can now be issued but after compounding of this section.
      Further share certificate shall be signed by two directors or company secretary and one director wherever CS is appointed.

      1. In the case of allotment of shares on conversion of CCPS, there is no timeline mentioned specifically under the Companies Act, 2013. However, Section 56(4) of the Act provides that allotment of shares shall be done within 60 days from the date of receipt of money. In this case, the company may first check the timeline, if any, mentioned in the offer document. If nothing is specifically mentioned then it may make the allotment within 60 days from the date of conversion of CCPS

    2. ‘X” company have received FDI from ‘Y’ company only against rights issue. but ‘y’ company says to allote 1% share to Z company from there amount. Is is possible. Can share be alloted in 99% and 1% ratio. If yes, what is the procedure. and do RBI will accept it in FCGPR.

      1. While reporting issue of shares against FDI received, the form FC GPR provides for a tab asking whether remitter is different from the subscriber/shareholder. On this basis, shares can be allotted to Z, provided Y has renounced the shares in favor of Z.

        You may refer to FEMA (Non-Debt Instruments) Rules 2019 for the procedure to be followed in order to report such a transaction. However, it is advisable to consult with your Authorized Dealer Bank for clear guidance on this.

  10. one of the company is incorporated on 27/08/2019 and the due date of filing form INC-20A is 22/02/2020. Now the subscribers are not willing to bring the subscription amount and file form INC-20A. In such case what are the remedies we can adopt ? can a company suo moto go for strike off ? or any other course of action company can adopt ? Pl revert.

    1. As per section 10A (3) of the Companies Act, 2013, the Company on failing to file Form INC 20A within 180 days from the date of Incorporation, the Registrar may initiate action for removal of the name of the Company from the ROC.

      Further as per section 248(1), the Company can make an application to Registrar to remove the name of the Company from ROC and where the Registrar has reasonable cause to believe that –

      248(1)(a) where it has failed to commence its business within one year of its Incorporation or;
      248(1)(d) the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under sub¬section (1) of section 10A or;

      Hence the Company can make an application to ROC u/s 248(1)(d) to remove the name of the Company from ROC.

      1. Further adding query in Striking off: In case subscriber are not willing to bring the subscription amount , we can go for strike off under 248(2) read with 248(1). My question is when we are filing STK-2 the same is showing error that Form INC-20A is to be filed first.what we can do in this case.

        1. Dear Ma’am

          Firstly, please make sure that 180 days from the date of incorporation have lapsed as Section 248 (1) of the Companies Act, 2013 states that a Company can be struck off if INC-20A is not filed within the prescribed period of 180 days. Also, now there is an extension of additional 180 days for such filing of Form INC-20A in view of COVID-19 outbreak. Thus, it may happen that the error persists even after a lapse of 180 days from date of incorporation. In that case, a ticket can be raised on MCA for further guidance.

  11. A application money inform form of land received from one of promoter as per promoters agreement. Further company approved preferential allotment to allot shares to two existing promoter so that article clause which prescribe 74:26 holding should be maintained. However, after shareholders approval one of the promoter not given the application money due to which shares not allowed to other promoter who have given application money in kind as land. As more than 1 year has been elapsed. Now can company allot shares solely to one promoter in lieu of land through board approval or only option to refund the land with interest. Seeking your kind advice on the matter.

    1. We won’t be able to do justice to the issue at hand without going through the articles. Nonetheless, please note what the law specifies in this regard:

      The provisions with respect to preferential offer is governed by section 62(1)(c) & Section 42 of the Companies Act, 2013. The Company is required to obtain Shareholders Approval by way of Special Resolution. As per the provisions, the Company is required to allot the securities within 12 months from the date of Shareholders approval. However, in your case the same has not been complied with. In order to allot the shares, the Company is required to pass another Special Resolution to complete such allotment thereafter.
      Further please note that where the shares are allotted for consideration ‘in Kind’ a valuation report is required to be obtained from the Registered Valuer to justify the valuation of such kind consideration.

  12. A closely held public company received share application money from one of its promoters in kind (an immovable property). The shares for the said application money could not be allotted within the prescribed time nor was the property returned. Now, can the board allot the shares against the said application money? Can this be done after compounding or some sort of relaxation from ROC?

  13. please tell what is the date of allotment in case of subscriber i.e on incorporation whether it is Date of Incorporation of 1st Board Meeting date

  14. A company has issued partly paid up shares on which Rs. 2.50/- paid up and its Nominal Value (Face Value is Rs. 10/-). After allotment company has issued share certificate with paid up value is Rs. 2.50/-. Our query is how to revised share certificate after receiving the remain calls money (unpaid up money)?

  15. How listed companies issues share certificates to its shareholders? Is it mandatory to issue share certificate under the common seal of the Company? Pls. guide.

    1. There is no procedural difference in issuance of share certificates between a listed and unlisted entity. Listed entities mandatorily have a Registrar and Transfer Agent (RTA) to facilitate the issue, transfer, consolidation, subdivision, dematerialisation of shares,etc of a listed entity. Thus, after the shares have been allotted at a board meeting, the listed entity submits the board resolution to issue and allot shares with the RTA along with shareholder’s resolution (if applicable), details of issuer, shareholder, price of issue, executed share certificates of the Company, etc. The RTA will scrutinize the documents and if found in order it will enter the name of the shareholders in the Register of Members. Please note that the concept of common seal has been abolished and only the signatures of 2 Directors and Authorised Signatory shall suffice.

  16. As per Companies Act, 2013 Form INC 20A is to be filed within 180 days declaration for receipt of share application money by the subscriber. In my case OPC was incorporated in June 2019 and bank account was opened in October 2019. So, share allotment and issue of share certificate will be done after October 2019, therefore, it is not possible to comply within two months after incorporation as subscription amount was not received at the time of incorporation. Please guide

        1. Assuming your query is related to subscription of memorandum of association of newly incorporated company, please take note of the following:

          1) Pursuant to the provision of Section 54(4)(a) of the Companies Act, 2013 the share certificate needs to be delivered within a period of two months from the date of incorporation.
          2) Per Section 10(2) of the Companies Act, all money payable by a subscriber is a ‘debt due’ to the Company and the Companies Act does not restrict issuance of share certificates before receipt of subscription amount. However, in case your Company has foreign investment, it is prudent to issue share certificates per RBI guidelines. Regulation 3 of FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 stipulates that Equity instruments shall be issued to the person resident outside India making such investment within sixty days from the date of receipt of the consideration.

  17. In case of Subscribers to the memorandum, also being first directors of Pvt.Ltd Co., the share certificate were not issued within 60 days from date of incorporation, what are the consequences?

    1. As per section 56 of the Companies Act, 2013, every company is required to issue the share certificate within a period of two months from the date of incorporation of the Company. However, if Company fails to comply with the aforesaid provision then following would be the consequences:

      1) The company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and;
      2)Director who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

      Further, for late fees of Stamp Duty, impounding is also need to be done with Registrar of Stamps. The penalty for the same can be upto 10 times of the stamp duty.

  18. can a private limited company issue shares in cash and such cash has been deposited in th bank account of the compnay. Amount -Rs 50000

      1. After considering the provisions of Section 62 and 42 of the Companies Act, 2013, a company can further issue the capital through Right Issue, Bonus Issue and through Private Placement.

        Except for the Right issue, no company can issue shares for consideration in cash

      1. Sir, whenever a company having a share capital makes any allotment of securities, it is required to file with the Registrar a return of allotment in Form PAS-3 pursuant to Section 39(4) and 42(9) of the Companies Act, 2013 and rule 12 and 14 Companies (Prospectus and Allotment of Securities) Rules, 2014.

        Hence, even a Private Company is required to file return of allotment.

  19. Is there any restriction / particular compliance for allotment of shares towards receipt of share application money 15 years ago from a foreign citizen and till the date money is in the liability side of BS as an share application money.

    1. Yes, there is restriction, As per provisions, the share application money received before 31st March 2014 should be either refunded or the company should allotted the securities by 01st June 2015 or should comply with deposit rules.
      So, the company should return or allot the shares by 01st June 2015 which has not been made, therefore the company and officer in default shall be liable for penalty under deposit rules.
      Further there are restriction in FEMA regulations also. Previously, before the commencement of Companies Act 2013, the shares should be allotted within 180 days from the receipt of funds from a Non-resident. The Company is also liable under FEMA regulations.

  20. HI Sir, I appreciate your efforts for replies and thanks for the same.
    A Private limited company allotted additional shares on right basis on 31st March 2019 to the existing shares holders and the PAS 3 has been filed. The amount for the same was paid th. cheque but the cheques was cleared in June 2019. This was disclosed in balance sheet as cheques in hand. Is there any contravention of companies act, please guide.

    1. The Companies Act, 2013 is silent about this. However applicable accounting standards has to be followed in this regard. As per Schedule III of the Act, it can be shown under the head “Cash and Cash Equivalents”.

  21. the company is incorporated on 29/10/2018 and initial subscription money have paid money in cash . is there any consequences for initial subscription money in cash ?

    1. There is no prohibition/restriction under the Companies Act, 2013 for receiving the subscription money in cash (i.e. not through account payee cheque or other banking channel). However, the Company and/or subscriber(s) has(ve) to comply with the provisions of the Income Tax Act with regard to cash transaction.

      In case of Private Placement (Sec – 42) and public issue of shares (Sec – 39), the money should be received by Cheques or other banking channels only therefore it is always advisable to pay money through banking channels.

  22. Hello!
    While Incorporating company, the share taken by the subcribers are wrongly feeded or incorrectly mentioned in MOA.
    What are the remedies does the company have to correct it.

    Thanks in Advance

    1. Hi,the subscriber sheet of the MOA mentions the name of the subscribers and the no. of shares each subscriber intends to take against it name. The subscriber signs against the shares that have been mentioned in the subscriber sheet. Therefore, the no. of shares mentioned in the subscriber sheet shall be subscribed by the subscriber. There are no methods to rectify the subscriber sheet once the incorporation is done.

      The shareholders after complying with INC-20A (filing declaration that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration) within 180 days of incorporation can transfer the shares to make the shareholding as per their desire.

  23. ABC Company is incorporated on 12.03.2019. Shares Certificates with stamp duty payment was done as on 06.06.2019. Is there any non-compliance?
    As per my understanding, Shares Certificates has to be issued within 2 months from incorporation and I have issued the same within due time.
    But if Stamp duty was paid after 2 months i.e. as on 06.06.2019 then there is any non-compliance?

    1. As per section 56 every company shall “deliver the certificates of all securities…” within two months from the date of incorporation in the case of subscribers to the memorandum. As far as payment of stamp duty on share certificates is concerned it must be paid within 30 days of its issue in terms of section 3 of the Indian Stamp Act.

      However, the word DELIVER in sec. 56 indicates that share certificates should be complete in all respect. Based on the facts of the case as quoted, share certificates should be delivered (duly issued and stamped) on or before 11th May, 2019 i.e. within two months from incorporation date.

      For delay in payment of stamp duty, impounding can be done with sub registrar of Stamps.

  24. My Company is incorporated in March 2019 with share capital of Rs, 100000/- and share holders bring capital in Bank Account in April 2019 then How I show Share capital Amount receivable from Share holders in Balance sheet as on 31/03/2019

    1. If your company has been incorporated in March 2019, the First Financial Year would be March 2019 to March 2020.

      You do not need to prepare the financial statements as on 31st March 2019 and file ROC Returns.

  25. Company got incorporated on 4th April 2018 and no actions performed after that including opening current account and share subscription. Can I proceed with formalities now and start the business?

    1. Yes, Company can start business including opening of bank account because it does not fall under section 248 of company Act 2013. Moreover, provision of section 10A of company Act 2013 and those relating to file Active form ( INC- 22A) does not apply to company concerned.
      But please not the following compliances needs to be done within 30 days of incorporation:

      (i) Having registered office and filing form INC-22, if the company has not complied, then the Company and every officer in default may be penalized for the same and name of company may also remove from Register of Companies.

      (ii) Appointment of Statutory Auditors by the Board of Directors.
      If fails, Board shall intimate the members and the members shall appoint at EGM within 90 days.
      Penalty: The company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both.

  26. Sir want to know if a company incorporated on august 2018 and the promoter had not paid the subscription money till date

    1. There is no time limit prescribed for the payment of the subscription money in the Companies Act, 2013.

      The subscription money is a debt to the company and the company can proceed to recover the amount.

      As the company is incorporated before 2nd November 2018, the company is not liable to file Form INC-20A and can commence its business or exercise the borrowing powers.

      Further note that the company should issue the share certificates within 2 months from the date of incorporation.

      No, where it is mentioned that for issue of share certificates, the money is to be paid. (The provisions are not clear as the paid up capital also includes any amount credited as paid-up in respect of shares of the company.)

  27. Dear Sir,
    What is the consequences if the shares allotted without receiving share application money from the Indian shareholder.

    1. Dear Sir, it is not clear that the allotment is made under right issue or private Placement route.
      If the Issue was for consideration for cash and the allotment has been done without receipt of the share application money, the following would be the consequences:

      1. In case of Private Placement: The Company ,Its Directors and promoters may liable for penalty which may extend to 2 Crore rupees. [Section 42 (11)]

      2. In case of Right Issue: There is no specific penalty provided under Section 62 or Chapter IV (Share and Debentures) for contravention of the provisions, therefore Section 450 shall apply.

      Also, the Form PAS-3 would need to be invalidate.

      In case of any further help/assistance required, please feel free to contact us.

  28. Hi!
    the company is incorporated on 21/05/2019. subscribers deposited the amount on 17/07/2019. now shares are to be alloted within 2 months from incorp. and it is to be done only through a board resolution, so do i need to hold a board meeting after 17th recognizing the receipt of amount by subs? also, how to file the allotment of shares with ROC?

    1. Pursuant to clause 55 of Section 2 of the Companies Act, 2013, date of incorporation of the Company is deemed to be the date of allotment of shares. Therefore, the equity shares were deemed to be allotted to the subscribers on the date of incorporation of the Company i.e. 21st May, 2019.

      Also note that at the time of incorporation no board resolution is required to be passed for allotment of shares. However, pursuant to Section 56(4)(a) of the Companies Act, 2013, the Company is required to issue share certificates within a period of two months from the date of allotment i.e. the date of incorporation of the Company for which a board resolution can be passed in the first board meeting itself (which is required to be held within a period of 30 days from the date of its incorporation, Section 173(1)) or later but within the prescribed timelines so that necessary compliance u/s 56(4)(a) is done.

      Also there is no requirement to file return of allotment with ROC at the time of incorporation.

  29. My company is incorporated on 05/03/2019.
    Authorised capital of the company is 1,00,000. No of equity share is 10,000. I have 500 equity share @10.0 each.
    What amount do we need to deposit in company’s account to issue share certificate to both of us (directors)

    1. As per section 10(2) of the Companies Act, 2013, the money payable by a subscriber is a debt due to the Company. Therefore, the subscribers are individually required to deposit amount equal to the amount of shares subscribed by them through Memorandum of Association of the Company on incorporation. In your case, since you have subscribed to 500 equity shares of Rs. 10 each, you are required to deposit Rs. 5,000 in the bank account of the Company. Similarly, the other subscriber shall deposit his share of subscription amount.

  30. After commencement of company within 1 month i am not able to operate it or no bank account created ,no share certificates as i am not able to raise the initial funds .What should i do ,Do i need to close the company or it will be closed by it’s own .

    1. Pursuant to provisions of Section 248 of the Companies Act, 2013, Registrar has a power to remove name of the Company from Registered Company if it has reasons to believe that the Company has failed to commence its business within one year of its incorporation or it is not carrying on any business or operation for a period of two immediately preceding financial years.

      As per the facts cited by you, your Company cannot apply for strike off as one year has not been elapsed yet.

      Also, after the completion of one year, Company can also apply for strike off by its own rather than waiting for Ministry to take action.

  31. Allotment money receive in 22/10/2018 and company allot share as on date of 21/12/2018. It is under 60 day criteria under FEMA shares allotment.

    1. As per Para 2 of Schedule 1 of Notification No. FEMA 20(R)/ 2017-RB, the shares are required to be allotted within a period of 60 days from the date of receipt of remittance.
      As per the details cited by you, the Company has fulfilled the criteria of 60 days.

  32. Hi, I have incorporated my OPC in June last year , have followed all the complainces, except issue of share certificate. Can I do it now. What will be the penalty for delayed issue of share certificate in OPC. Plz clarify. Thank you.

    1. For not issuing share certificate:

      Penalty on Company:
      Min. Rs.25,000 – Max. Rs.500,000
      and
      Penalty on Officer in Default:
      Min. Rs.10,000 – Max. Rs.100,000

      No exemption to OPC from this compliance.

      Further, yes, instead of waiting for any notices it is our advise to issue share certificate at your own, immediately as delayed compliance is better than non-compliance. Additional stamp-duty as may be applicable from state to state shall be payable for such delayed stamping of share certificate.

    1. The money received against share application shall be shown on Liabilities side under the head Share Capital as Share Application money pending allotment as well as on Assets Side under the head Current Assets as Cash & Cash Equivalents.
      Considering the above accounting treatment same can be placed in Fixed Deposits unless the allotment is done against the share application money received.

      Also, please note that the Share Application money can’t be utilized till the respective allotments are completed; the purpose of utilization of the application money can only be either allotment of shares or refund.

  33. I applied 500 shares in ‘CENTURY LAMINATING CO LTD.’ Ipo in the year 1995 and paid application money of Rs. 6250/- (Rs.10 /- face value and Rs. 40 /- as premium amount) and I was alotted 500 shares. Company declared 1:1 bonus in the year 1996.Further Co. declared twice dividend in the year 1999.I was alotted dividend on pro-rata basis on 500 shares. Due to change of my address I was unable to trace my warrants.In the year 2006 I approached co.and send them with two uncashed warrants for revalidation through registered post and also for change of new address in co.records. But sorry to inform you that co. never acknowledged my post nor they sent me revalidated dividend warrants. Meanwhile in 2018 I again approached co. to know my status. After repeated reminders to co.on mails pursuing them to inform me of the balance call money with interest for the payment of balance call money rather they mailed me stating that your shares has been forfeited in the year 2002. I would like to share with you that first the co. got delisted in the year 2002 and then changed there name to ‘Merino Industries ltd.’in the year 2006 and now planning for a ipo. Please inform and help me to obtain my ownership with all the benefits on these alloted shares.
    Waiting for your earliest response to solve my case. My contact details are as below :-
    Paramdeep singh
    117 /496, pandu nagar,
    Kanpur – 208005
    Mob no. 7860043500

    1. You are advised to seek proper consultancy as your query requires research. Also, such technical queries are not feasible to be answered via website.
      Nevertheless, we are here to serve you for your general queries.

  34. A Pvt. LTD is incorporated on 04/10/2018. Till now no bank account is opened and no subscription money received from subscriber. Please tell the consequence and remedy available and what further steps need to be taken

    1. The ROC can suo-moto on serving a notice on the Company, strike off the name of the Company in case the subscribers have not paid the subscription money within 180 days of the incorporation of the Company. Please take steps to comply.

        1. As per section 248(1)(b), Registrar has the power to remove name of company from register of companies if subscribers to Memorandum have not paid the subscription money within 180 days of incorporation and declaration regarding that has not been filed.

          However, nowhere it has been mentioned that strike-off can be completed within 180 days.

  35. My 100 shares stand cancelled as allotment or call money was not paid how can I get those 100 shares back again??

    1. If the allotment or call money was not paid, then the shares are forfeited by the Company. A forfeited share is a property of the issuing company and is disposed off/re-issued at its own discretion. A defaulted share holder cannot purchase back his earlier forfeited shares. However, if such shares are re-issued by the company, you can subscribe for the same.

  36. Payment of Stamp Duty on Issue of Share Certificates is applicable to Gujarat State but we find no proper site to pay stamp duty on share certificate for Private Limited companies.

    1. The provision for payment of E-stamps is available for all States and Union Territories on the website of Stock Holding Corporation of India Limited. Interestingly, Gujarat is the first state to launch e-stamping in India. Create the Login Credentials for the Company and you are good to go!

  37. In case of Private Company
    Date of allotment of equity shares -12/11/2018
    what will be the date of issue of share certificate and whether we have to first pay stamp duty on share certificate and to write on its face that consolidated stamp duty is paid on…. and then issue share certificate.
    or any other way?.
    In case of allotment whether is there any restriction on issue of no of share certificate to a member regarding a particular range i.e 10,000 shares 10 certificate etc.?

    1. The share certificates are required to be delivered within 2 months from the date of allotment.

      Based on the facts of the case as quoted, share certificates should be delivered on or before 11th January, 2019 (deliver here means complete in all respect. i.e. signed and stamp duty paid).

      Further added that there is no restriction on issue of number of share certificates to a particular member and there is no limit on range of shares for particular share certificate but in general practice, one share certificate is issued to each allottee in case of issue of share capital by the Company irrespective of number of shares allotted to them.

  38. 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.

  39. 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?

  40. 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

  41. 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.

  42. 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.

  43. 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.

  44. 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?

  45. 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.

  46. 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.

  47. 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/- .

  48. 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.

  49. 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

  50. 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.

  51. 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. “

  52. 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.

  53. 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

  54. 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.

      1. Sir, The Company has incorporated on 10/05/2019 and the bank account opened on 18.03.2019 Application money received by subscriber of MOA on 24/05/2019 Franking is done on 23/08/2019. is company can issue share certificate on current date what will be the consequences of not issuing share within 2 month from the date of incorporation. is company falls in any default. Kindly clarify

        1. As per section 56 of the company Act, 2013, Company is required to issue share certificate within 2 month of its incorporation so in your case, last date of issuance of certificate was 10th July, 2019 as the company was incorporated on 10th May, 2019.

          if company fails to issue share certificate within the aforesaid time it shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees

          However If company was prevented from issuing the share due to order of court or other regulatory at or by virtue of provision of any Act It may not be liable for the fine.

          Further the company has also delayed in payment of stamp duty, therefore the company shall also impound the offence under Stamp Act

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