Meaning: - On receiving the applications, the
company has to take the decision regarding allotment of shares. The allotment
of shares has been defined as “the appropriation (distribution) to an
applicant, by a resolution of the Board of Directors of a certain number of
shares in response to an application”.
In short allotment means accepting the offer made by
the investor to purchase the shares. The decision regarding allotment is taken
by the Board of Directors. A procedure is to be followed to allot the in a
particular manner.
Following
are the Procedure of Allotment of shares:
1.
Preparation of Application List: -After the last date for submission of
share applications secretary collects the applications and verifies them.
Irregular and incomplete forms are kept aside. Then the secretary prepares
application list
2.
Appointment of Allotment Committee: -The power to allot shares is of the
Board; but generally a sub-committee of directors is appointed to look into the
matter of allotment.
3.
Decision about basis of allotment: -Sub-committee prepares a report
regarding the allotment. On the basis of the report, Board of Directors
finalise the policy of allotment.
Generally
allotment is done by one of the following ways in case of oversubscription:
a)
Lottery method: -shares can be allotted by lottery method
by drawing lots.
b)
Pro-rata method:
-In this method shares are
allotted to every applicant, but in proportion to the number of shares applied
for.
c)
Preference method: -Allotment can be done by giving
preference on certain base like allotting shares to those who have applied for
less number of shares or more number of shares.
4.
Board Meeting: -Board is the proper authority to take
decision on allotment of shares. Therefore Board meeting is convened to
consider the report of allotment committee and to pass the resolution of
allotment.
5.
Nominee of SEBI: -After finalising the policy at company
level, the secretary has to inform SEBI to send a public representatives as a
nominee of SEBI to finalise the policy of allotment. Representative is
essential especially in case of oversubscription.
6.
Signature of Chairman: -The secretary then makes entries in the
allotment register by writing the number of shares allotted to each applicant.
He takes the signature of the chairman on the list.
7.
Sending Letter of Allotment or Regret
Letter: - The
secretary prepares the letter of allotment stating the particulars of the
number of shares allotted, the amount payable on allotment etc. the secretary
prepares the letter of regret for those who have not been allotted the shares.
8.
Receiving allotment money: -The secretary makes necessary
arrangement with the bank for collecting allotment money.
9.
Refund of excess application money: -when the company issues less number of
shares then applied, company has to return the excess money to the applicant.
10. Filling
return of allotment:
-The secretary prepares a return of allotment stating the necessary particulars
as number of shares allotted, face value of each share, names and address of
allottees, etc.
11. Issuing
Share Certificates:
-The secretary prepares share certificate and issues them to the allottees
within three months of the
date of allotment.
12. Preparation
of Register of Members:
-The secretary then prepares Register of Members and enters all the particulars
regarding allotment in it. Then the allottees become members of the company.
