WHETHER A COMPANY CAN UTILISE THE SHARE APPLICATION MONEY UNTIL SHARES ARE ALLOTTED AND PAS-3 IS FILED?

 WHETHER A COMPANY CAN  UTILISE THE SHARE APPLICATION MONEY  UNTIL SHARES ARE ALLOTTED AND PAS-3 IS FILED? 

PAS-3 (RETURN OF ALLOTMENT OF SHARES) 

 

Filing PAS-3 (Return of Allotment of Shares) with the MCA is a statutory compliance under Section 39(4) and Section 42(9) of the Companies Act, 2013 read with Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. 

 

MCA VALIDATION ERROR IN CASE OF PAS-3 DELAYED FILING  

MCA systems are now actively catching delayed PAS-3 filings. If you file PAS-3 beyond the timelines — 30 days in case of a rights issue and 15 days in case of private placement — the form starts throwing validation errors, making further filing impossible. 

 

WHAT IS AN FO TICKET? 

 

When an FO ticket (a Formal  

Objection or Feedback  /Objection ticket )is raised, the response usually suggests filing a CRF form. However, once it goes to RoC, CRF approval is not given easily for master data corrections. Instead, RoC examines past PAS-3 filings along with AOC-4 and MGT-7, and if delays are found, the matter is pushed for adjudication. 

 

WHAT IS A CRF FORM IN MCA ? 

 

A Change Request Form, a specialized web-based tool for MCA-21 users to request modifications to company master data or records that cannot be handled by existing standard forms or functionalities. 

 

MASTER DATA CORRECTION  

 

When an FO ticket is raised, the response usually suggests filing a CRF form. However, once it goes to RoC, CRF approval is not given easily for master data corrections. Instead, RoC examines past PAS-3 filings along with AOC-4 and MGT-7, and if delays are found, the matter is pushed for adjudication. 

 

Regulatory OUTCOMES OF NON-FIILING OR DELAYED FILING OF PAS-3 

• Allotment treated as invalid / irregular until PAS-3 is filed. 

• ROC may question the validity of shares allotted and may not update the Register of Members in MCA records until PAS-3 is filed. 

• In case of further filings (e.g., SH-7 for increase in share capital, filing of MGT-7 annual return), delays or mismatches may occur due to non-updation of shareholding data. 

EFFECT ON THE COMPANY 

• Difficulty in raising further funds (investors and banks often check PAS-3 filings to confirm shareholding). 

• Non-compliance record may affect company’s standing in due diligence (for mergers, acquisitions, IPO, etc.). 

• Possible adjudication by ROC – Companies have faced adjudication orders imposing penalties for late PAS-3 filings. 

COMPANIES SHOULD NOT UTILISE THE FUNDS UNTIL SHARES ARE ALLOTTED AND PAS-3 

Most importantly, RoC’s view is that a company should not utilise the funds until shares are allotted and PAS-3 is filed. While Section 62 does not expressly prohibit utilisation in a rights issue, RoC considers early utilisation as defeating the intent of law. 

 

FINAL THOUGHTS  

Delayed filing of PAS-3 leads to  

(i) heavy additional fees, 

 (ii) monetary penalties on both company and officers,  

(iii) regulatory hurdles in recognition of shareholding, and  

(iv) reputational / compliance risks during scrutiny, funding, or M&A. 

R V SECKAR , FCS ,LLB 79047 19295