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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

A company's articles authorise it to accept unpaid share capital in advance. Mr. Rao pays Rs 20,000 on his shares before it has been called up. Which statement is correct?

Mr. Rao has no voting rights in respect of the Rs 20,000 paid in advance until that amount is called up. The Act permits a company to accept uncalled amounts if its articles authorise it, but denies voting rights on that advance amount until it is called.

  1. AHe has voting rights on that amount immediately
  2. BHe has no voting rights on that amount until it is called upCorrect
  3. CThe company must refuse the payment
  4. DThe payment is treated as a reduction of share capital

Explanation

Section 50 allows a company, if authorised by its articles, to accept the unpaid amount even if not called up. The member is not entitled to voting rights on the amount so paid until it has been called up. Hence voting rights immediately is wrong.

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