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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


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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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!

  9. 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.

  10. 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.

  11. 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?

  12. 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

  13. 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.

  14. 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.

  15. 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.

  16. 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?

  17. 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.

  18. 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.

  19. 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/- .

  20. 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.

  21. 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

  22. 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.

  23. 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. “

  24. 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.

  25. 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

  26. 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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