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Allotment of Shares refers to the process by which a company issues and allocates shares to its shareholders, including new investors or existing shareholders, in exchange for capital or other considerations. This process typically occurs when a company raises funds through the issuance of equity, whether during its incorporation, through public offerings, or private placements.
The board of directors must pass a resolution authorizing the issuance of shares and setting the terms, such as the number of shares, price, and type (equity or preference shares).
The company offers shares to prospective investors. This can be through a public offering (Initial Public Offering or IPO), private placement, or rights issue to existing shareholders.
Potential investors apply for shares, specifying the number of shares they wish to purchase and providing the necessary funds or other considerations.
The company reviews the applications and determines how many shares to allocate to each applicant. If demand exceeds the supply, shares may be allotted on a proportional basis or via a lottery system in some cases.
Once shares are allotted, the company issues share certificates to the investors as proof of ownership, or registers the shares in electronic form through a depository system.
The company must file a return of allotment with the relevant corporate registry (e.g., Registrar of Companies) detailing the shares allotted, to whom, and the consideration received.
The primary benefit of share allotment is raising capital for business expansion, debt repayment, or working capital needs.
Through private placement, companies can bring in strategic investors who may provide not only capital but also expertise, connections, and market access
Rights issues and bonus issues reward existing shareholders by allowing them to increase their stake in the company at favorable terms.
The company can control how shares are allotted, preserving voting power and influence among key stakeholders or founders.
No, a company cannot allot more shares than its authorized share capital. If needed, the company must first increase its authorized capital.
Allotment refers to the process of allocating shares to shareholders, while issuance refers to the actual distribution of share certificates or crediting shares to shareholder accounts.
Yes, shares can be allotted in exchange for non-cash considerations, such as assets, intellectual property, or services rendered.
The time frame varies by jurisdiction, but companies typically have between 15 to 30 days from the date of allotment to file the return with the appropriate authorities.
In case of oversubscription, shares may be allotted on a proportional basis, or through a lottery, depending on the company’s policies and regulations.
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