Allotment of Shares

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

Allotment of Equity Shares of Private Limited Company

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.

Time Limit for Allotment of Shares

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.

Time Limit for Issue of Share Certificates

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

Exemptions and Important Features of OPC

  • Filing of Prospectus A statement in Lieu of Prospectus must be filed, inviting offers from the public for the purchase of shares in the company.
  • Application Money Payable The amount payable as application money must be atleast 5 percent of the nominal amount of the share.
  • Minimum Subscription No allotment of shares can be made unless the “Minimum Subscription” as given in the prospectus had been subscribed or applied for.
  • Separate Bank Account The amount of share application money must be deposited in a separate bank account.
  • Refund in case Minimum Subscription not received If the minimum subscription amount of 90% of the issue was not achieved by the company within 60 days from the closure of the issue, the company has to refund the entire subscription amount immediately. For any delay beyond 78 day, the company has to pay an interest of 6 % per annum.

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Frequently Asked Questions

What is the allotment of shares?

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.

How much time is needed for allotment of shares?

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.

Will I get any Proof or evidence for allotment of shares in the Company?

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.

What are the ways for allotment of shares?

Following are the ways for allotment of Shares;

  • Issue and allotment of Bonus Shares (Known as capitalization of Profits).
  • Issue and allotment of Right Shares only to the existing members of the Company.
  • Issue and allotment of Shares on a Private Placement basis or Preferential allotment.
  • Issue and allotment of Shares against any unsecured loans or borrowings or guarantees.
  • Issue and allotment of Shares pursuant to the exercise of option by the holder of debt security for conversion into Equity Shares.
  • Issue and allotment of Shares pursuant to the ESOP or ESOS.
  • Issue and allotment of Shares pursuant to any scheme of Merger or Amalgamation or takeover.

Are there any hidden charges after I take any of your services?

No Hidden charges. Every detail regarding charges is transparent as you will see in your mailbox.