Share deposits of public interest entities must be converted into paid-up capital within six months – FRC.
March 5, 2020.
The Financial Reporting Council (FRC), a regulatory agency established under the Financial Reporting Act (FRA) 2015, issued a notification in this regard on February 11, 2020. This notification was issued because a number of publicly traded companies have abused the share money deposit to falsify their results.
According to the notice:
The share money deposit obtained for expanding a company’s equity or paid-up capital may not be withdrawn or returned under any circumstances.
Share money deposits must be converted into paid-up capital within six months of receipt.
Share money deposits will be treated as potential shares until they are converted into paid-up capital, and the corporation must display diluted earnings per share in the financial statement or the impact of the new shares on EPS.
This notification applies to all public interest entities.
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