Vinu: Hi Manu. We had stipulated a condition to one of our corporate borrowers to infuse additional capital. We gave them three months for compliance. Now they’ve submitted a letter saying that capital has been infused. But the audited balance sheet reflecting this will come only next year. So, apart from waiting for the next year’s balance sheet, how do I verify that capital has actually been brought in? What documentary evidence can I ask from the company or verify from any source to ensure that real cash has come into the company and not just on paper?
Manu:
That’s a very valid concern, Vinu. Waiting for the balance sheet is too late—there are several evidences you can demand now to verify the capital infusion:
Board or Shareholders’ Resolution:
Ask for a certified copy of the Board Resolution or Shareholders' Resolution approving the capital increase. This will show that the decision was formally taken.
Bank Statement of the Company:
Request their bank statement showing the actual credit of funds into the company’s bank account. This is one of the strongest evidences that actual cash has come in.
Form PAS-3 (Return of Allotment):
Ask for a copy of Form PAS-3 filed with the Ministry of Corporate Affairs (MCA). It contains details about the shares allotted, amount received, and names of allottees. You can even verify this through the MCA portal.
Share Certificates and Register of Members:
Check if new share certificates have been issued and whether the register of members has been updated accordingly.
Auditor’s Certificate:
A CA certificate stating that the company has received funds against share capital and that shares have been allotted properly is a reliable supporting document.
MCA Master Data or Public Documents:
You can view public documents or the updated paid-up capital under the MCA website for confirmation.
Stock Exchange Filing (if listed):
If the company is listed, check their disclosures to the stock exchange. Any capital infusion must be disclosed under SEBI regulations.
Cash Flow Statement (if available):
If they provide a provisional statement of accounts or trial balance, a cash flow statement will show cash inflow under financing activity.
Vinu: Thanks, Manu. That was comprehensive. So, basically, I should insist on board/shareholder approvals, bank proof of funds, MCA filings like PAS-3, and ideally, an auditor’s confirmation. This way, I don’t have to wait for the audited balance sheet to be convinced?
Manu: Exactly. With these documents, especially bank statement and PAS-3, you can reasonably satisfy yourself that actual cash has been infused. Always verify consistency between documents—don’t rely on any one piece alone.
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