Accept the money only on the right basis
Section 50(1) of the Companies Act, 2013 allows a company to accept some or all unpaid amounts on a member’s existing shares before a call where the Articles authorise it. Under section 50(2), a member of a company limited by shares gains no voting rights from the advance amount until it has been called up. Receipt of cash and recognition of voting rights are separate events.
Read the applicable text: MCA: Companies Act, 2013, sections 47, 49–51 and 106.
Build a share-by-share movement record
Record nominal amount, amount called, amounts paid against calls, eligible advance, unpaid calls and uncalled amount. Identify the member and shares against which the advance was received. Use the Articles, receipt and later valid call to determine allocation. Do not apply an advance to different shares or a different shareholder on the strength of an aggregate cash total.
Update the poll base after the relevant call
For ordinary equity poll examples below, assume no differential voting rights or other voting restrictions. Reconcile the paid-up equity amounts that count under section 47, excluding section 50 advances until they are called. On a valid call verify application of the advance, actual payment by other holders, and relevant entitlement dates before finalising the poll. Section 49 requires calls on shares of the same class to be uniform, subject to its explanation for differently paid shares.
Keep other rights and restrictions separate
Section 50 deals with voting on advance amounts. Do not infer dividend entitlement, interest terms or treatment of unpaid calls from it. Check the Articles and applicable law independently. Under section 106, the Articles may restrict voting on shares with unpaid calls or other sums presently payable, or shares subject to a company lien. An uncalled balance is not an overdue call. Keep evidence of the legal call and application of funds rather than changing historical records.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Single voluntary payment
A member holds 1,000 shares with ₹4 per share called and paid and voluntarily advances another ₹3 per share. ₹3,000 is advance cash and ₹4,000 is the paid amount entering the assumed poll base.
Illustrative example 2: Uncalled headroom
A member holds 2,000 shares of ₹10 each with ₹6 called and paid. Total uncalled amount is ₹8,000. If ₹5,000 is accepted in advance, ₹3,000 of that uncalled amount is not funded.
Illustrative example 3: Partial later call
A member paid ₹4,500 in advance on 1,500 shares, allocated at ₹3 per share. A valid ₹2-per-share call uses ₹3,000 of it; ₹1,500 stays in advance.
Illustrative example 4: Two-member poll before a call
A and B each have 1,000 shares with ₹5 called and paid. A alone advances ₹2,000. Both have ₹5,000 in the poll base, giving 50% each.
Illustrative example 5: Two-member poll after a call
On the same share counts a valid ₹1-per-share call applies ₹1,000 of A’s advance, and B pays ₹1,000 separately. Each now has ₹6,000 in the base; A still has ₹1,000 excluded as advance.
Illustrative example 6: Cut-off and denominator
Assume a poll with A’s eligible ₹9,000 and B’s eligible ₹6,000. B also advances ₹3,000 but it is uncalled on the relevant date. A holds 60% of the eligible base; using all cash would incorrectly show 50%.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm authority in the Articles | Current Articles and relevant provision |
| 2 | Identify existing shares and holders | Register and allotment record |
| 3 | Check called and unpaid amounts per share | Call history and member ledger |
| 4 | Identify voluntary advance receipts | Receipt and payment instructions |
| 5 | Split call payments from uncalled advances | Share-by-share reconciliation |
| 6 | Verify uniformity of a later call | Resolution and section 49 review |
| 7 | Apply advance to the supported call | Call records and allocation evidence |
| 8 | Freeze the relevant voting entitlement data | Poll cut-off and share records |
| 9 | Review separate voting restrictions | Articles and entitlement exceptions |
| 10 | Archive the denominator and reconciliation | Poll working and approval trail |
Sixteen practitioner FAQs
1. Can a company accept an advance without Articles authority?
Section 50(1) requires authority in the Articles.
2. Does section 50 apply to money for shares not yet held?
Its wording refers to amounts on shares held by the member; examine other receipts under their own legal basis.
3. Can the holder pay only part of the unpaid amount?
Section 50 permits the whole or part, subject to the applicable authority.
4. Does early payment immediately increase voting rights?
No. Section 50(2) excludes rights on that amount until called up.
5. Can the advance affect voting after a valid call?
Reconcile the call, application and entitlement at the relevant date.
6. Is bank receipt date the date the money was called?
No. Keep separate evidence of both events.
7. Does one advance allow a selective call on the same class?
Check section 49 and the same-class facts; receipt alone is not authority for selective calls.
8. What if shares of the same nominal amount have different paid amounts?
Section 49 treats shares of the same nominal value as different classes for that section when different amounts have been paid up. Exclude uncalled advances when testing the paid-up amount for this control.
9. Should unpaid called amounts be merged with uncalled advances?
Keep separate records and apply the actual entitlements and any restrictions.
10. Does section 50 itself set interest on advances?
No. Review the Articles and terms separately.
11. Does section 50 itself determine dividends?
No. Section 51 permits dividends in proportion to amounts paid up on shares where the Articles authorise this. Check the Articles for the treatment of payments in advance before using an amount in the dividend calculation.
12. Can a shareholder advance on only some of its shares?
Trace the accepted advance to identified shares and the authorised terms.
13. Does the article’s percentage example govern every poll?
No. It assumes ordinary equity and no special rights or restrictions.
14. What if the call follows the voting date?
Determine rights as of the relevant entitlement date; do not backdate the call.
15. Can the register include the cash without overstating votes?
Yes. Maintain a separate advance field and exclude uncalled amounts from the voting calculation.
16. What should reviewers reconcile at the end?
Tie receipts, calls, allocations, residual advance and poll entitlement to the share records.