Article contains brief discussion about Non-receipt of subscription money by the subscribers at inception stage of the company, time limit for issuing share certificate and bringing subscription money within time frame as per Companies Act 2013 and consequences for non-compliance.
The Company is considered as a separate legal entity, which requires Capital to carry out the business and at the time of formation minimum number of members who can act and do contracts on the behalf of the company. These members are termed as “Subscribers”. Subscribers are also considered as first shareholders of the company.
Whereas Companies Act 2013 gives minimum number of required members on formation of the company:-
A. In case of Private Company, minimum numbers are required as members are two.
B. In case of Public Company, minimum numbers are required as members are Seven.
C. In case of One Person Company, minimum numbers are required as members are one.
MEANING OF SUBSCRIBERS & MEMBERS:-
The definition of “Member” is given under Section 2(55) of companies Act 2013 in relation to a company, means-
(I) The subscriber to the memorandum of the company who shall be deemed to have agreed to become a member of the company, and on its registration, shall be entered as a member in its register of members.
(ii) Every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;
(iii) Every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository.
Subscribers are those persons whose name is entered in Memorandum of Association and by signing the MOA they are giving consent to take some amount of shares of the company by contributing capital to the entity.
The term “Subscription Money” refers to that amount where subscriber is willing to subscribe shares of the company at a face value and need to deposits the amount in bank of the company.
Earlier there was no time limit prescribed in the Companies Act for depositing the subscription money by the subscribers to the Company, but in the Companies Act 2013 in Section 56 it is mentioned that the Company need to issue the Share certificate within a period of 2 months from the date of incorporation of the Company in case of subscribers to Memorandum of Association, whether the amount has been deposited or not, a share certificate is required to be given.
TIME LIMIT FOR BRINGING IN THE SUBSCRIPTION MONEY AS PER COMPANIES ACT 2013 :-
TIME LIMIT FOR BRINGING IN THE SUBSCRIPTION MONEY AS PER FEMA :-
Some Relevant case laws:-
In Sant Chemicals Pvt. Ltd. Vs. Sant Chemicals Pvt. Ltd. with Aviat Chemicals Pvt. Ltd. and Jagmohansingh Arora and others it has been held that “Section 30 of the 1913 Act, is para materia to section 41 of the 1956 Act”.The subscribers to the memorandum of association become members of the Company on registration/ incorporation of the Company. Entry in the register of members is a matter of procedure and that is to beperformed by the authorised director/secretary post incorporation of the company. The entry in the register of members is for maintenance of records of the Company and mere omission of entry shall not revoke his membership once the Company is incorporated.
In Official Liquidator of the U.P. Oil Mills Company Ltd. Vs Jamna Prasad and Others it has been held that “the words shall be deemed to have agreed to become members of the company” mean that the subscribers of the memorandum of a company are to be treated as having become members of the company by the fact of the subscription.
Consequences of non-payment of subscription money:-
Thus,every subscriber should fulfill obligation to deposit the number of shares in the bank at the time of incorporation and thereafter so that such person continues to act as a member of the Company until there is an instance of transfer, transmission, surrender of shares of the Company and the same is reflected in the registers of the Company.
Jaya Sharma-Singhania, Founder- Jaya Sharma & Associates, Email: email@example.com
Ayush Maheshwari – Jaya Sharma & Associates, Email : firstname.lastname@example.org
If consideration amount is not paid but the share certificate has been received, But there has been not a single call or notice to pay the amount , now can thy forfeit my shares? what can I do ?
according to your article, we can issue share certificates without receiving subscription money from MOA subscribers, on that certificate we have to mention paid-up amount zero(NIL) and no stamp duty to be paid.
Thanks, well explained
Can we cancel unpaid share capital which was subscribed by first subscriber and not paid?
We have registered a private limited company in August 2020 and must subscribe the paid up capital of Rs. ONE crore with in 180 days the Director only Deposited Rs. 10 Lakh in the company Accounts can apply for Certificate of commencement business . Promoters saying due to clerical mistake Authorised and Subscribed capital written same in Spice Incorporation Form . Can mistake rectified . Kindly reply .
Can a subscriber withdraw the subscription money from the bank account of pvt co and is there any time limit and process for the same. Plz guide..?
We have registered a private limited company in Feb 2020 and must subscribe the paid up capital of Rs. ONE crore with in 180 days. Due to present circumstances we don’t wish to block as we don’t know if we wish to go head with business in this.
Q.1. Can we reduce the paid up capital from one crore to few lacks and pay and leave that money in bank? If yes how much minimum we can? Although we have paid fees for full capital.
Q2. Can we close the company if we don’t wish to block 1 Cr. As paid up capital?
Pls advise ASAP.
how to rectify the amount which is still due from the subscriber but not yet paid by him. For eg. amount on 500 share not paid at the time of subscription, post this annual returns are filed, now we want to remove this subscriber who has not paid amount. How to do that?
Mam i am director of a company & also subscriber to memorandum. Company failed to issue us share certificates in 60 days. Also, we have not deposited share subscription money in 60 days. Please guide what should we do now ?