ALLOTMENT OF

SHARES

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Prepared by: Amit Gupta

ALLOTMENT OF SHARES

Offer vs. Invitation to offer

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Prepared by: Amit Gupta

PROVISIONS FOR
ALLOTMENT OF SHARES

General Provisions (of the Indian Contract

Act, 1872)
Special Provisions (of the Companies Act)

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General Provisions

Allotment must be made by proper authority

Within reasonable time
Must be communicated
Absolute and unconditional

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Prepared by: Amit Gupta

SPECIAL PROVISIONS

For Private Companies

For Public Companies
When no public offer is made
When an offer to public is made

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Prepared by: Amit Gupta

When no public offer is made

Only one restriction u/s 70

Such a company can not proceed to make a
valid allotment of shares unless atleast three
days before the first allotment it has filed with
the registrar a Statement in lieu of
Prospectus.

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Prepared by: Amit Gupta

When an offer to public is made

First Allotment of Shares

Subsequent Allotment of Shares

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Prepared by: Amit Gupta

First Allotment of Shares

A copy of the prospectus must be filed with the registrar u/s 60

Must receive atleast 5% in cash of the nominal value of the
share as application money u/s 69(3)
Minimum subscription must be received within 120 days of
the issue of the prospectus u/s 69(1)
Application money must be deposited in a scheduled bank and
it cannot be withdrawn till the company secures the certificate
to commence the business u/s 69(4)
The company shall not proceed to allot the shares until the
beginning of the fifth day from the date of the issue of the
prospectus u/s 72(1)
Shares & Debentures to be dealt in on stock exchange u/s 73
Initial offer of securities to be in the demat form u/s 68B

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Prepared by: Amit Gupta

Subsequent Allotment of Shares

Except the conditions (3) & (4) all other terms

will remain same

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Prepared by: Amit Gupta

Irregular Allotment and its Effect

Meaning of Irregular Allotment u/s 71
Effects:
Voidable at the option of the allottee: (within 2 months of the
statutory meeting or allotment u/s 71(1)(2))
Directors Liability: Directors willfully authorising the irregular
allotment shall be liable to compensate the company and allottee
for any loss or damage u/s 71(3)
Fine: Every director who is knowingly responsible for the default
shall also be punishable with fine upto Rs. 50,000 for the
companies who invite public and Rs. 10,000 for the companies
who do not invite public u/s 70(4)

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Allotment Procedure
The Return as to Allotments u/s 75
Number and nominal amount of shares alloted for
cash
Names, addresses & occupations of the allottees
If shares are issued for consideration other than cash
then the copy of the contracts
If bonus shares are issued then number of shares,
nominal amount of shares, names, addresses &
occupations of the allottees
If shares are issued at discount then the copy of the
ordinary resolution

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