Shares Allotment
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Basic Plan
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- Drafting of Share Transfer Form (Form SH-4)
- Issuance of New Share Certificate
- Electronic Certificate Delivery
Standard Plan
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Basic Plan
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- Hard Copy Certificate Delivery
- Assistance with Lost or Damaged Certificates for 3 years
Premium Plan
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Standard Plan
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- Legal Consultation on Transfer Process
- Priority Processing
- Dedicated Account Manager
- Digital Storage of Documents
- Post-transfer Support
What is Shares Allotment
Shares allotment is the process of issuing and distributing shares to investors, existing shareholders, employees, or the public. It helps businesses raise funds and expand.
A company must follow legal guidelines and compliance rules when allotting shares to avoid penalties or legal issues.
This guide explains everything you need to know about shares allotment in a simple and easy-to-understand way.
Types of Shares Allotment
A company can allot shares in different ways, depending on its capital structure and business needs.
Example: A startup planning to expand raises funds by issuing shares through a private placement to investors.
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Companies must comply with Companies Act, 2013, SEBI regulations (if applicable), and other legal requirements when allotting shares.
Key Legal Provisions
- Section 42 & 62 of Companies Act, 2013 – Governs private placement and rights issue
- SEBI Guidelines – Applies to listed companies for public offerings
- FEMA (Foreign Exchange Management Act, 1999) – Regulates foreign investments
- Stamp Duty & Tax Compliance – Mandatory for share transactions
Forms Required for Shares Allotment
Example: A company issuing bonus shares must file Form PAS-3 with the Registrar of Companies (ROC) within 30 days.
Process for Shares Allotment
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- The Board of Directors passes a resolution to approve the allotment
- In case of private placement, an offer letter (PAS-4) is issued
- Certain types of allotments (like preferential allotment) require shareholder approval
- A special Extraordinary General Meeting (EGM) may be needed
- Investors deposit subscription money to the company’s bank account
- Maintain a separate bank account for funds received (if required)
- The board passes a resolution approving the allotment of shares
- Shareholders receive share certificates within 2 months
- The company files Form PAS-3 with details of the allotment
- Attach necessary documents, including board resolution and list of allottees
- The company issues share certificates within 60 days
- Ensure proper stamp duty payment on share certificates
Example: A company raising ₹10 crores through a private placement must complete the process within 60 days and file PAS-3 within 30 days.
Compliance & Legal Requirements
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Example: A company increasing its authorized share capital must file Form SH-7 within 30 days.
Tax & Financial Aspects of Shares Allotment
Tax Implications
Capital Gains Tax – Applies when shares are sold at a profit
Stamp Duty – Mandatory on share certificates
GST & Income Tax – No GST on share allotment, but income tax applies on dividends
Impact on Company’s Financials
New shares increase capital base but dilute existing ownership
Retained earnings decrease in case of bonus shares
Rights issue helps existing shareholders maintain control
Example: If an investor buys shares at ₹100 and sells them at ₹150, they must pay capital gains tax on ₹50 per share.
Common Mistakes to Avoid in Shares Allotment
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