Authorised capital – The authorised capital may be verified with reference to the amount shown in the Memorandum of Associations. Previous year audited balance sheet may also be seen.
Issued capital – Verify the amount of issued capital with reference to last year audited balance sheet. Also see whether the Central Government has issued any notification for conversion of debenture or loan into equity share under section 94A. Further issue of capital – The general points are given as under:
(1) Study the conditions of issue contained in the Memorandum and Articles of Association, Prospectus or Statement in lieu of Prospectus, shelf prospectus, red-herring prospectus and information memorandum, as the case may be, and see that all of them have fully been complied with.
(2) Verify that the first allotment was not made until the amount of minimum subscription stated in the Prospectus had been subscribed and until then the amount received was kept deposited in a Scheduled bank as required by Section 69 of the Act.
(3) Confirm that the brokerage and underwriting commission was paid only at the rates authorised by the Prospectus or the Articles of Association, having regard to the provisions contained in Section 76.
(4) Ensure that legal requirements as laid down in section 81 (dealing with right shares) have been complied with.
(5) Verify that preliminary contracts, if any, entered into for purchase of a property or business, for creating an organisation for management of the company, etc. have been carried out strictly according to the terms stated in the Prospectus.
(6) Ensure that the company intending to offer shares to the public for subscription by the issue of a Prospectus has, before such issue, made an application to one or more recognised stock exchanges for permission for the shares intending to be so offered within the stock exchange or each stock exchange as required by the Companies (Amendment) Act, 1988. Section 73 provides that allotment made by a company would be void if the permission is not granted by stock exchange before the expiry of ten weeks from the date of the closing of the subscription list.
(7) Confirm that the guidelines issued by the Securities and Exchange Board of India (SEBI) have been followed. Compliance reports submitted by lead managers and reports submitted to SEBI may be examined in this regard.
(8) Ascertain that there exists an internal check on receipt of amounts alongwith the application and that the same throughout has continued to function satisfactorily.
(9) Verify compliance with legal provision relating to issue of shares at premium (section 78), issue of shares at discount (section 79), and issue of sweat equity shares (section 79A)
