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Share allotment is the creation and issuing of new shares, by a company. New shares can be issued to either new or existing shareholders. Share allotment can have implications for any existing shareholders share proportion. Typically, new shares are allotted to bring on new business partners.
As per the Companies Act, 2013 there are two ways by which a company can raise its funds. It can be done through the private placement of shares and rights issue of shares. It is important to know that a private company can either issue shares to its existing or current shareholders by the method of the rights issue or provide them bonus shares.
Difference Between Right Shares and Bonus Shares are as mentioned Below
| Particulars | RIGHT SHARES | BONUS SHARES |
|---|---|---|
| Meaning | Right shares are the one available to the existing shareholders equivalent to their holdings that can be bought at a fixed price, for a definite period of time. | Bonus shares refer to the shares issued by the company free of cost to the existing shareholders in the proportion of their holdings, out of accumulated profits and reserves. |
| Price | Issued at discounted prices | Issued free of cost |
| Objective | To raise fresh capital for the firm. | To bring the market price per share, within a more popular range. |
| Renunciation | Shareholders may fully or partly renounce their rights. | No such renunciation |
| Paid up Value | Either fully or partly paid up. | Always fully paid up. |
| Minimum subscription | Mandatory | Not required |
Shares Valuation
Share valuation is to be done to decide on the new limit of the authorised capital, or say alteration of the capital clause of the MOA directors must meet in a legally convened board meeting.
Offer shares to the existing shareholders for private placement
The existing shareholders of the company have the first right to any issue of share. In case the shares to be issued do not get fully subscribed by the existing shareholders then the directors can approach other investors.
Approval Formalities
To approve the allotment of new shares of the company, the director’s meeting is called, wherein the majority decides on approving the allotment of shares.
Filing of Return of Allotment in Form No PAS-3
After the approval by the board of directors of the company, a return of allotment of equity shares is filed with the ROC in form No PAS-3. with the approval of the same by ROC, the paid-up capital of the company stands increased.
| S.No. | Particulars | Details |
|---|---|---|
| 1 | Allotment within 60 days | Allotment shall be done within 60 days of receipt of application money. |
| 2 | If not allotted within 60 days, refund in next 15 days | If allotment is not done within 60 days then refund the whole application money within next 15 days. |
| 3 | If not refunded within 15 days | Refund application money along with interest @12% p.a. after the expiry of 60 days, and It shall be treated as a public deposit after the expiry of the said 15 days. |
| S.No. | Particulars | Details |
|---|---|---|
| 1 | In case of subscribers to memorandum | Within 2 months from the date of incorporation |
| 2 | In case of allotment of shares | Within 2 months from the date of allotment |
| 3 | In case of transfer or transmission of securities | Within 1 month from the date of receipt by the company of the instrument of transfer or intimation of transmission |
| 4 | In case of allotment of debentures | Within 6 months from the date of allotment |
Share issue and allotment is the process by which companies pass on new shares to shareholders, who may themselves be new or existing shareholders. With a share allotment, the shares are created and issued by the company to the people who become the company's shareholders.
Allotment of Shares usually takes 2-3 working days subject to the approval of the Central Govt. and the receipt of documents from the clients.
No. However, the Master Data of the Company on the MCA portal will be updated whenever the further Shares are issued and allotted the same can also be checked through this link at the field of Paid-up Share Capital of the Company.
Following are the ways for allotment of Shares;
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