Q.Explain briefly the procedure for allotment of shares.

Allotment of shares is done by following a set procedure: receiving applications, ensuring minimum subscription, holding a Board meeting to pass the allotment resolution, complying with SEBI/stock exchange rules, and issuing allotment/regret letters and refunds.

Allotment of shares means the acceptance by the company of the offer made by an applicant to buy shares. It results in a valid contract between the company and the allottee. The secretary plays an important role and must follow the procedure given below.

1. Receipt and scrutiny of applications — Applications received (through banks/registrars) along with application money are collected and scrutinised to see that they are complete, properly signed and accompanied by the required money.

2. Minimum subscription — The secretary must ensure that the minimum subscription (at least ninety percent of the issue as required by SEBI) has been received within the prescribed time. If it is not received, the money must be refunded and no allotment can be made.

3. Compliance with legal and SEBI requirements — Before allotment, the company must comply with the provisions of the Companies Act, 2013 and SEBI guidelines, and, in the case of a listed company, obtain permission for listing from the stock exchange. Without listing permission, allotment is void.

4. Convening the Board meeting — The secretary issues notice and agenda and convenes a meeting of the Board of Directors. The Board passes a resolution approving the basis of allotment. Where the issue is oversubscribed, the basis of allotment is finalised in consultation with the stock exchange to ensure it is fair.

5. Basis of allotment — In case of oversubscription, shares are allotted on a fair and proportionate basis; excess applications are rejected or partly allotted, and the surplus application money is either adjusted towards allotment money or refunded.

6. Preparation and despatch of letters — The secretary arranges to send:

   • Letters of allotment to successful applicants, stating the number of shares allotted and the amount due on allotment.
   • Letters of regret to unsuccessful applicants, along with refund of their application money.

7. Refund of application money — Application money of rejected applicants and the excess money of partly successful applicants is refunded within the prescribed time; delay attracts interest.

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