3.7 Query: 

Disclosure of amount due from subscribers to the

Memorandum towards subscription shares.

1.  The querist has sought the opinion of the Expert Advisory Committee on whether the unpaid amount toward shares subscribed by the subscribers of the Memorandum of Association, should be considered as ‘paid-up capital’ or the amount received from subscribers to the extent called for should be considered as ‘paid-up capital’.

2.The querist has expressed his view that it is not necessary that the subscribers to the Memorandum of Association have to pay the amount on shares agreed to be subscribed by them immediately on incorporation of the company as no time limit has been prescribed under the Companies Act, 1956, for such payment. Therefore, the amount received from subscribers, to the extent called for, should only be considered as “paid-up capital”. However, a contrary view has been expressed that in view of the undertaking given by the subscribers to take the number of shares specified by them in Memorandum of Association, the total amount of the shares subscribed should be considered as ‘Subscribed and paid-up capital’ in the balance sheet and the unpaid amount on such shares should be treated as debts due from subscribers and appropriately disclosed in the balance sheet.

                                                                               Opinion                               May 30, 1991

The Committee is of the opinion that the unpaid amount towards shares subscribed by the subscribers of the Memorandum of Association should be considered as ‘subscribed and paid-up capital’ in the balance sheet and the debts due from the subscriber should be appropriately disclosed as debts in the balance sheet.

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