Quick Answer: What is mean by share application money pending allotment?

Is share application money pending allotment part of net worth?

Can share application money used pending allotment?

The Pune Income-tax Appellate Tribunal (the Tribunal) recently held that share application money received from shareholders pending allotment could not be characterised as or equated with share capital.

What is application money on shares?

Share application money is the amount received by a company from applicants who wish to purchase its shares. It is the money received in respect to an initial public offering of shares. This money can be more or less than the actual amount anticipated in respect to the number of shares floated.

Is share application money pending allotment part of net worth?

As share application money pending allotment is neither free reserve nor paid up capital, the same cannot be included in the computation of net worth.

What is application and allotment money?

A ledger account used in the process of applications for and allotment of a company’s share capital. … On receipt of the applicants’ money, the company debits the bank account with the cash received and credits an application and allotment account.

What is the procedure for allotment of shares?

Procedure for allotment of shares are as follows:

  1. Appointment of Allotment Committee: …
  2. Hold Board Meeting to Decide the Basis of Allotment: …
  3. Pass Board Resolution for Allotment: …
  4. Collection of Allotment Money: …
  5. Arrangement Relating to Letters of Renunciation: …
  6. Arrangement Relating to Splitting of Allotment Letters:
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What is the minimum share application money?

The minimum share application money is 5% of the nominal value. The money received by the company when it issues shares to the public is known as application money. Allotment is made to the shareholders once the application money is received.

Can share application money be returned?

Section 42(6) mandates allotment of shares within 60 days of receipt of share application money and if it is not allotted, money shall be refunded within 15 days. If not refunded, the company shall pay interest at the rate of 12% per annum.

What type of account is share allotment?

Share Application or share allotment or Share capital A/c all are personal accounts as they represent money from the shareholders and when money is due, these are to be debited because of the rule “Debit the receiver”.

Can application money be used before allotment?

Earlier, under old Companies Act regime, many companies accepted share application money under private placement and utilized the same for the business purpose even without allotment of shares. … Now, Section 42 of the Companies Act, 2013 puts prohibition over the said practice.