Usually, there are three stages in the issue of shares for cash, viz. :
- Receipt of applications for shares along with application money;
- Allotment of shares and receipt of allotment; and
- Making calls and receipt of call money.
The programme of work to be carried out in respect of each of the above mentioned three stages is stated below :
Applications – Verify the amount received alongwith the applications for shares in the following manner :
- Check entries in the Application and Allotment Book (or Sheets) with the original applications;
- Check entries in the Application and the Allotment Book as regards deposits of money, received with the applications, with those in the Cash Book;
- Vouch amounts refunded to the unsuccessful applicants with copies of Letters of Regret;
- Check the totals columns in the Application and Allotment Book and confirm the journal entry debiting Share Application Account and crediting Share Capital Account.
- Examine Director’s Minutes Book to verify approval of allotments.
- Compare copies of letters of allotment with entries in the Application and Allotment Book.
- Trace entries in the Cash book into the Application and Allotment Book for the verification of amounts collected on allotment.
- Trace the amount collected on application as well as those on allotment from the Application and Allotment Book into the Share Register.
- Check totals of amounts payable on allotment and verify the journal entry debiting Share Allotment Account and crediting Share Capital Account.
- Examine the Director’s resolution making the call.
- Vouch amounts received with the counterfoils of receipts.
- Trace postings of the amounts received from the Calls Book (for calls due) and the Cash Book (for calls collected) into the Share Register.
- Verify the journal entry, debiting the Call Account and crediting Share Capital with totals of the amounts due.
- Note the calls in arrears.
- Ascertain that the nominal value of shares allotted does not, exceed the authorised and issued capital and that allotments were made in accordance with conditions contained in the Prospectus.
- See the returns of allotment have been filed with the Registrar of Companies.
- Extract balances of shareholders’ accounts contained in the Share Register and tally their total with the balance in the Share Capital Account.
- If the issue was underwritten, examine the contract with the underwriters to ensure that all obligations under the contracts have been fully satisfied.
- Vouch payment of commission and brokerage, the first by reference to the underwriting contract and the second by reference to stamps of brokers on application forms.
- See that the company has delivered share certificates within three months after the allotment of any of its shares in accordance in the procedure laid down under Section 53. Note : The signatories to the Memorandum of Association being the first shareholder of the company, it is usual to make allotment in their favour.