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Allotment of Shares: 2022

Team Freetaxguru

Allotment of Shares: 2022

In this Article we discuss about the topic “Allotment of Shares”.

 

Prospectus issued by a Company is an invitation to the public to make offer for the Company’s Shares.Application for shares is the offer from the applicant to purchase shares. And Allotment of Share is acceptance by the company of the offer.

Allotment of Shares - Rikvin Pte Ltd

Allotment stands for “The Appropriation out of the previously unappropriated share capital of the Company”. It is simply defined as a Resale of existing shares. In Simple words the prospectus in an invitation to the public to buy shares. Persons want to purchase shares have to apply in a form prescribed in the prospectus for the purpose. The application for shares by intending shareholders is an offer for the purchase of shares and when accepted by the company, is known as an Allotment of Shares.

Basics Principles regarding Allotment:

  • Allotment should be made by proper authority:The duty of allotting shares is of the board of directors of the company. The board should pass a resolution of allotment at its meeting.
  • It should be made within reasonable time: Allotment must be made within a reasonable period of time otherwise the provider can refuse to take the shares.
  • It must be communicated: There can be no binding contract unless acceptance to the offer is properly communicated to the applicant.
  • It should be absolute and unconditional: Allotment must be absolute, unconditional and must conform to the terms and Conditions of the application.

  • Books of accounts by certain persons carrying on business or profession

Here are some Statutory Provisions on Allotment of Shares:

  1. Registration of Prospectus: In case of public offer of shares, a company is required to file a copy of prospectus with the Registrar of Companies for registration.
  2. Minimum Subscription: The amount indicated in the prospectus as minimum subscription must have been subscribed for within a period of 30 days of the issue of prospectus by the SEBI.
  3. Application of Money: Sum of at least 5% of the nominal value of shares must be received in cash by the company as application money.
  4. Money to be kept in a scheduled Bank:All application money received from public for subscription shall be kept in a separate Bank account.
  5. Return of Application Money: if the stated minimum amt. has not been subscribed and the sum payable on application is not received within a period of 30 days from the date of issue, the amt. received from applicants shall be returned within 15 days period from the closure.
  6. Return of Allotment: The return of allotment should state the number and nominal amount of the shares.
  7. Penalty: in case of any default the company and its officer who is in default shall be liable to a penalty.
  8. Securities:Listing of all public issues with any of the recognized stock exchange is Compulsory.
  9. Issue of Securities in Dematerialized form: Every company making public offer of any security shall issue the security shall issue the securities only in dematerialized form.

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