The Financial Reporting Council (FRC), a regulatory body under the Financial Reporting Act (FRA) 2015 recently issued a notification in this regard on 11 February 2020 (Gazette published on 2 March 2020). This notification was issued as a number of listed companies have misused the share money deposit to manipulate their performance.
According to the notification:
- the share money deposit received for increasing equity or paid up capital of a company must not be withdrawn or taking back at any means.
- Share money deposit must be converted into paid up capital within six months of deposit.
- Share money deposit will be considered as potential share until its conversion into paid up capital, and the company must show the diluted earnings per share in the financial statement or impact of the new shares on EPS.
Public Interest Entities are required to abide by this notification.