What will happen if the Subscribers to MOA does not bring subscription money?
Channel: R V Seckar
Date: 2020-07-21

When the subscribers to the MOA of the  Company should bring money in respect of  the shares subscribed by them therein?
What will happen if the Subscribers to MOA  does not bring subscription money? 


As per section 3 of Companies Act, 2013 A company may be formed for any lawful purpose by minimum 7 member in case of public Company, minimum 2 member in case of private Company or one member in case of OPC. The number of shares each subscriber to the memorandum intends to take indicated opposite his name in MOA. By signing of subscriber sheet of MOA they enter into a contract with the Company.


Sometime situation occurs when subscribers to the MOA  to pay subscription money as agreed by them in MOA. In this video, I will discuss what are the compliances to be done by the Company in such situation.




Liability of subscribers
 The subscribers of the memorandum of a private or public company need pay nothing to the company on subscription; their undertaking to pay when called upon is sufficient. Each subscriber is liable to pay to the company the full amount of the shares for which he has subscribed when a call to pay up is made on him by the directors or on the date or dates fixed for payment. The obligation to pay for the shares subscribed applies even if the subscriber is the nominee of another person.
Whether Allotment of Shares and filing of PAS-3 is necessary in case of signatories to Memorandum ?
Companies Act is silent as to when the payment in respect of the shares agreed to be taken as to be paid. • The subscribers would be deemed to have agreed to become members of the company and on its registration the name of subscribers is required to be entered as members in the register of members of the company. • Thus, there is no need to allot shares in the names of subscribers to the memorandum of association in respect of the shares agreed to be subscribed by them in subscription clause of the MOA. Thus no PAS-3 should be filed.


Whether Liability of Subscribers to Memorandum can be transferred to another person?
The liability of each subscriber is equal to the total amount due on the shares subscribed for by him. The liability will not be discharged by his taking a transfer of the shares allotted to any other person nor by the allotment to him of any shares credited as fully paid up to which some other person is entitled. Migotti's case, Re, South Blackpool Hotel Co., (1867) LR 4 Eq 238; Forbes and Judd’s case, Heyford Iron Works Co., (1870) 5 Ch App 270.




Whether the share subscription money is to be paid immediately on the incorporation of the Company? 
There is no time period provide under the CA, 2013 for payment of subscription money by the subscribers to the Company. Therefore, we can say that it is not mandatory to pay share subscription money immediately on the incorporation of Company.


Issuance of share certificates to Subscribers to MoA when subscription money is not paid yet ? 


Every company pursuant to section 56(2) shall deliver the certificates of all securities allotted within a period of two months from the date of incorporation, in the case of subscribers to the memorandum.
As per the provision of the section 56 Company have to issue share certificate within a period of 2 months of incorporation of the company. Whether money received or not from the subscribers
Whether such subscriber will be considered as Member.
 As per Section 2(55) “Member”, in relation to a company, means 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. It is clear from the definition that subscriber will become a member on the registration of the Company irrespective of the fact that subscription money is received or not.
It is clear from the extract of Section 88 name of the subscriber as a member of the Company will be entered in the register of Member.


If a Company after Incorporation doesn’t receive the amount from the subscribers then what will be the situation. There are some questions came in our mind in such Situation: 
• Whether such subscriber will be considered as Member. 
• Whether the name of such member will be mention in the Register of Member. 
• Whether such person will be count for the quorum in the General Meeting. 
• Whether such subscriber will get right to vote in the Meeting of the Shareholders.
•  Whether Company can issue Share Certificate to them without receipt of Money.
•  Whether Subscriber can transfer the shares and authorise new person to make payment to the Company.
•  Whether Company can transfer their shares to anyone else.
In case the subscription monies are not received from the first subscribers, how the subscription monies receivable is to be reported in the Balance Sheet? Is it deducted from the paid up capital?