Meaning of Allotment Shares

Agreement for allotment of shares i.e by issuing prospectus, the company invites
public to purchase share. Persons who are interested to take shares apply to the
company and when the company accepts the said offer for the purchase of shares is
known as an allotment of shares. In Nicol's case 1885 it was held that an allotment
is generally neither more or less than the acceptance by the company of the offer to
take shares.
Unconditional Acceptance: An acceptance must be unconditional and correspond
with the terms of offer. For example, if any applicant applies for 50 shares but he is
allotted only 20 shares in his name, he may refuse to take it.
General Principles of allotment of Shares
1. Allotment by proper Authority: An allotment of shares must be made by the
proper authority. Here the proper authority indicates persons who are eligible to
allot shares by virtue of provisions of the articles. Generally, an allotment must be
made by resolution of board of directors.
Any person delegated with power, under the provisions of the articles, can make
allotment of shares. So the competent authorities to allot shares are:
Board of directors
Any competent person under the articles of association
The secretaries or the treasurers of the company if they are authorized by the
articles of association.
2. Allotment to be made in a reasonable time: The allotment is made within a
reasonable time. The term reasonable always varies from facts to facts.
3. Allotment must be communicated: The letter of allotment must be
communicated to the applicant. It is sufficient for communication that the company
has allotted and sent a letter by post to the proper address of the applicant with
sufficient stamp and it is quite immaterial whether the letter is delayed or not.
4. Allotment must be absolute and unconditional: Allotment must be absolute.
That means, if the applicant applies for 100 shares and if he is allotted 20 shares it
is not absolute.
Procedure of Allotment of shares
i)Registration and Issue of Prospectus
ii) Minimum Subscription
iii) Money to be deposited in the Schedule Bank
iv) Refund of money deposited in the Schedule Bank
v)Opening of Subscription List
vi) Closing of the Subscription List
vii)Delivery of statement in liue of Prospectus to the Registrar
viii) Final Allotment of Shares
ix)Procedure in case of Over Subscriptions
x)Letter of Allotment

Irregular Allotment
When a company allots shares without maintaining due process relating to
allotment of shares then it is said irregular allotment. When a company allots
shares without fulfilling the conditions mentioned in section 141and 148 the
allotment is irregular. The reasons are:
When the allotment is made by the public company which has issued a prospectus
without receiving 5% of the nominal value of shares as application money
When the allotment is made without receiving the minimum subscription or
without depositing application money in the schedule bank.
Effect of irregular Allotment
Allotment voidable
Suit for compensation against directors
Fine
Share Certificate and Share Warrant
Share and Stock