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    Refusing to Make Payment For Subscription of Shares

    Posted By : Kamal / Published on : 15-Jul-2021 04:18 PM / View : 349 / Comment : 1

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    Dear members,

    In newly incorporated Nidhi company one of shareholder cum director is refusing to pay subscriber money for to proceed now?

    Can we directly allot shares to someone else with board resolution stating subscriber to moa is dening to pay??
    Read more on : shares subscription payment make refusing

    • 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 / 08:08:23 AM
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