ABC Cargo Private Ltd. was incorporated on 28.03.2024. As per requirement of Companies Act, 2013, the company is to issue the share certificates to the subscriber of Memorandum of Association (MOA) within two months. The

In case of a newly incorporated company the subscribers to Memorandum automatically become members of the company on the date of incorporation u/s 2(55) (i) read with Section 9 of Companies Act, 2013 and their names have to be entered in the register of members. Share certificates have to be issued to the subscribers within 2 months as provided in Section 56(4)(a) failing which penalty provision as per sub-section (6) gets attracted. A question that arises here is whether share certificate is required to be issued even if subscription money has not been received from the subscribers. Interestingly, the answer is yes. Subscription money payable is a debt under Section 10(2) of the Act and company can file suit for recovery of the same. As per ICAI guidance note on Schedule III to the Act: "However, 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 an asset in the balance sheet." In this case there was delay of 74 days in issue of share certificates to subscribers due to delay in receipt of subscription money and hence ROC levied penalty of ₹50,000 each on the company and its officers which is justified.