ABC Ltd. plans to accept call money from shareholders in advance, before it is actually due. However, the company is unsure whether it is legally allowed to do so. Under which authority can ABC Ltd. accept calls in advance from shareholders?

Articles of Association

The correct answer is option 2- Articles of Association.

Under the authority of Articles of Association, ABC Ltd. can accept calls in advance from shareholders.

A company can accept calls in advance if authorized by its Articles of Association. The Articles of Association outline the rules and regulations governing the internal management and operations of the company. If the Articles of Association grant the company the authority to accept calls in advance, then they can do so. Sometimes shareholders pay a part or the whole of the amount of the calls not yet made. The amount so received from the shareholders is known as “Calls in Advance”. The amount received in advance is a liability of the company and should be credited to ‘Call in Advance Account.” The amount received will be adjusted towards the payment of calls as and when they becomes due.