# Calls-in-Advance — Section 50

## Concept

A company may, if authorised by its articles, accept from a member the whole or part of the amount remaining unpaid on shares held — even though that amount has not yet been called up. This is known as calls-in-advance.

## Key Rules

### 1. Authority Required

Must be specifically authorised by the Articles of Association (AOA).
Without such authority, the company cannot accept calls-in-advance.

### 2. No Extra Voting Rights

The member paying in advance does NOT get extra voting rights compared to other members until all members have been called upon to pay the equivalent amount.
Voting rights remain proportionate to the called-up amount, not the actually paid amount.

### 3. Interest on Calls-in-Advance

Interest may be paid on the advance, if permitted by the articles.
The rate of interest specified in the articles can be varied by shareholders in general meeting.
Example: A rate of 6% specified in articles may be increased to 10% by shareholders in general meeting.

## Connection to Partial Payment

A shareholder on whom a regular call is served may choose to pay only a part of the sum due. The debt of calls made is not an entire and indivisible debt, hence the company may be bound to accept the partial amount tendered.

## Who Decides How Much to Call?

The decision on how much to call on partly-paid shares rests with the Board of Directors, subject to clauses in the Articles and terms of issue.

Worked example

### Example 1

Example 1 — Voting rights on calls-in-advance:

Mr. A holds 1,000 shares of ₹10 each, ₹5 called-up. He pays the full ₹10 in advance. The remaining ₹5 (uncalled) does NOT give him extra voting rights until the company calls up that ₹5 from all other shareholders. His votes remain based on the called-up amount.

### Example 2

Example 2 — Variation of interest rate:

XYZ Ltd's articles permit interest @ 6% p.a. on calls-in-advance. In a general meeting, shareholders pass a resolution to increase the rate to 10% p.a. This variation is valid since the articles' rate can be modified by shareholders in general meeting.

⚠️ Common exam mistakes

Assuming calls-in-advance automatically gives voting rights on the advance amount — it does NOT until the company calls up that amount from all members.
Forgetting that authorisation by articles is mandatory; the company cannot accept calls-in-advance just on the Board's decision.
Confusing calls-in-advance with calls-in-arrears — advance is paid before call is made; arrears is unpaid after call is made.
Assuming the interest rate in the articles is fixed and cannot be varied — shareholders in general meeting can change it.

Bare-Act text Section 50 · The Companies Act, 2013 · click to expand

Section 50: A company may, if so authorised by its articles, accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up. Such advance payment will not entitle the member to more voting rights as compared with other members until all have been called upon to pay.

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Calls-in-Advance (Section 50)

Worked example

⚠️ Common exam mistakes