Vinu: Manu, I saw in the balance sheet that the company has shown capital infusion during the year. How can we verify whether it's genuine?

Manu: Good question, Vinu. The first thing we should do is check the bank statement of the company. The amount of capital infused should be clearly reflected as an inflow in the company’s bank account, preferably from the promoters or shareholders.

Vinu: Okay. So, if money is received, is that enough? Or should we look for some more documents?

Manu: No, just the bank entry is not enough. We must also look at the supporting documents. If it's a company, verify the Form PAS-3 filed with the MCA for share allotment. It will show details like number of shares issued, to whom, and at what price. Also, check for board resolutions, share application forms, and share certificates issued.

Vinu: What about if the business is a partnership or LLP?

Manu: In that case, check the Partnership Deed or LLP Agreement to see the agreed capital contribution. Then verify the partner’s capital account ledger, and importantly, confirm the amount credited in the firm’s bank account. That shows actual cash inflow.

Vinu: Suppose they have shown capital infusion, but no money came in? What if it’s just a book entry?

Manu: Then that’s a red flag! We must ensure that the capital is not being window dressed or introduced through circular transactions. Some companies show capital infusion just before balance sheet date and withdraw it soon after. That’s a sign of doubtful genuineness.

Vinu: Is there a way to cross-check this from the government portal?

Manu: Yes. For companies, visit the MCA portal and download the financials and Form PAS-3. If capital was genuinely infused, these filings will reflect the same. Also, verify the notes to accounts in audited financials — capital changes are usually disclosed there.

Vinu: And what if they say shares were issued at a huge premium?

Manu: Then we must ask for the valuation report that justifies the premium. Also, trace whether the premium money came through banking channels. If there’s no proper justification or traceable source, it could be a case of money laundering or tax avoidance.

Vinu: So, to summarise, what all should we check?

Manu: 

Vinu: Got it, Manu. So, capital infusion should always be backed by money trail and proper documentation. Otherwise, it’s risky for us as bankers to accept it at face value.

Manu: Exactly, Vinu. Always remember — trust but verify when it comes to capital infusion.

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