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    Non receipt of initial subscription money

    Posted By : Damini / Published on : 03-Sep-2020 12:35 PM / View : 341 / Comment : 1

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    Dear members,

    I have one query regarding commencment form for one company-

    OPC Co formed on 30.8.2019 with paid up capital 100000
    Bank account opened with some initial transcations
    And director deposited cash of 115000 as consideration of sharecapital and den normal transcations done.

    Will that cash deposit count as valid proof of share capital?

    Moreover, there are some transcations equivalent to 100000 as upi transfer from director saving to company account on differrent dates, but almost same amount has been transferred to some parties also.

    Can we use that instead of cash deposit?
    Read more on : money subscription initial receipt

    • A subscriber enters his name, address, occupation and the number of shares to which he subscribed in the Memorandum of Association.

      By Signing or subscribing to MOA, subscriber enters into a contract with the company and if the subscription money is not received from the subscriber then it will be considered as breach of contract by the subscriber and may attract civil action for this As per section 10(2) of the Companies Act, 2013, all monies payable by any member to the company under the memorandum and articles is a debt due from subscriber to the company, therefore the subscriber cannot refuse to pay the subscription money, once the Memorandum is registered [Metal Constituents Ltd., In re (1902) 1 Ch. 707].

      In case of incorporation of a company, the shares are deemed to be allotted on the date of incorporation of Company however the subscription amount is received subsequently.

      A situation may arise when subscribers to the Memorandum of Association fails to pay subscription money as agreed by them.

      Under this circumstances, section 10A was inserted by Companies (Amendment) Act, 2019, which states that every company incorporated after 2nd November, 2018, needs to file a declaration in Form No INC-20A, stating each subscriber to the memorandum has paid the value of the shares agreed to be taken by them, within 180 days of the date of incorporation.

      It is clear from the definition of the subscriber, that subscriber will become a member on registration of the company.

      The name of the subscriber as a member of the company will be entered in the register of Members. Further, pursuant to Section 56 of the Companies Act, 2013, every company shall deliver the certificates of all securities allotted within a period of 2 months from the date of incorporation, irrespective of the fact that subscription money is received or not.

      22-09-2022 / 08:07:57 AM
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