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Allotment of Shares

Allotment of shares is an appropriation of a certain number of shares to an applicant and distribution of shares among those who have submitted written application. It is governed by companies act, 2013 and rules & regulations incorporated therein and for Listed Companies) whose shares are listed on the NSE and BSE or any other applicable Stock exchanges in India and whose shares are freely tradable without any restrictions) and Subsidiary of Listed Companies the provisions of SEBI act, 1992 and the securities contracts (regulation) act, 1956, are also applicable


  • A public company may allot shares in the following ways:
    1. to public through prospectus (public offer)
    2. through private placement
    3. through a rights issue or a bonus issue
  • A private company may allot shares in the following ways:
    1. through a rights issue or a bonus issue
    2. through private placement/ preferential Allotment



An application is made to stock exchange(s) for the shares to be dealt through it/ them, before any offer of allotment to public. Allotment of shares is always in e-materialized form and the offer for the allotment of shares is made through red herring/ shelf prospectus, as the case may be. In public offer, no allotment is made unless minimum amount stated in the prospectus has been subscribed and consequently return of allotment is to be filed with the registrar.


A private placement offer letter is issued to such number of persons not exceeding 50 but limited to 200 in a financial year and the allotment of shares through private placement is to be approved by the shareholders through a special resolution only. A complete record of private placement offers is to be kept by the company and is to be filed with the registrar and to SEBI (for listed company).


A letter of offer in the form of notice is issued to the existing equity shareholders for the purpose of rights issue which provides with the right of renunciation to the existing equity shareholders w.r.t. the offer for the allotment of shares.
Accordingly, subscribed capital of the company is increased in rights issue.


Only fully paid-up bonus shares are issued to the members, out of:

  1. free reserves
  2. securities premium account; or
  3. capital redemption reserve account, maintained by the company in this regard

Bonus issue is to be authorized by the AOA of the company making the allotment of bonus shares and it is recommended by the board and then approved by the shareholders in the general meeting of the company.

- As on 1st July 2019