What is share allotment?

Many people do not know what is meant by share allotment in a Private Limited Company. In a PLC, share allotment is created and distributed by the company. This involves giving either old or new shareholders the shares. In this process, the company raises the company capital for different reasons like expansion, acquisitions, and so on.

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    The different types of share allotment

    1. Right Issue: Current holders of the company shares are given more shares which is often calculated based on the current amount of their existing shares.

    2. Private placement: This is the share allotment process whereby the company raises funds by selling its share to a selected group of interested buyers.

    3. Public placement: In this share allotment process, the company sells its shares to the
    general public.

    4. Preferential allotment: In this case, the company issues its shares to a selected
    group of people by preference.

    The share allotment process

    The share allotment process is one that is done in several steps to be completed.
    These steps include:

    • The company sends out a notice to hold a board meeting.
    • The company holds an EGM (Extraordinary General meeting) in order to approve the private placement offer letter.
    • The company goes to draft the private placement
    • In the EGM, the company passes a Special Resolution that has a 12-month validity.
    • Within a month of passing the Special Resolution, the company uses the (ROC) Registrar of Companies to file the Form MGT-14.
    • The company calls a Board Meeting to allot the shares.
    • 30 days within the process of share allotment, the company files the Form PAS-3 with the ROC.

    What documents do you need for share allotment process

    • You will need copies of the AOA and the MOA
    • The latest copy of Annual Returns
    • Passports of the new shareholders
    • A document verifying the address of the new shareholders.
    • A document showing members’ registration

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    Frequently Asked Questions

    A company shareholder is an investor that owns a part of rights and responsibility in a company. This is possible with owning shares.

    Allotment of shares is necessary for a company to raise capital for its operations. This is in expectation of making a profit.

    A company usually distribute its shares among the shareholders. The shareholders will have to make an official application to access the shares.

    The company allots it’s shares to the public by offering new shares. It then invites the public or current shareholders to apply for the shares. The company assigns the shares based on the number of shares that each shareholder has applied for.

    There are four different ways a company can allotted shares. They are right issue, private placement, public placement, and preferential allotment.