Frequent question: What are the legal effects of allotment of shares?

Sec. 72(3) states that the validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section, but,, in the event of any such contravention, the company, a fid every officer of the company who is in default, shall be punishable with fine which may extend to Rs. 5,000.

What are the effects of irregular allotment of shares?

An allotment which is not made after complying with the statutory requirements cited above, shall be considered as an invalid allotment and is void. But an irregular allotment is not an invalid allotment or a void allotment. An irregular allotment is only voidable at the instance of the allottee.

What are the general conditions and legal rules to be followed in the allotment of the shares?

What are the general provisions in allotment of shares? Application of allotment and allotment is nothing but offer and acceptance. Hence these are dealt under the Indian Contract Act. The principles that follow are allotment by proper authority, within a reasonable time, acceptance to be absolute and unconditional.

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What is illegal share allotment?

(i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or.

What does allotment of shares mean?

Allotment generally means the distribution of equity, particularly shares granted to a participating underwriting firm during an initial public offering (IPO). There are several types of allotment that arise when new shares are issued and allocated to either new or existing shareholders.

Do shareholders need to approve allotment of shares?

Registration of an allotment is important. The new shareholder(s) will not hold the allotted shares or be a member of the company, until the registration process is complete. any shareholder resolutions (passed at a meeting or using the written resolution) required for the allotment.

Can allotment of shares be Cancelled?

Jayashree Chandrasekaran. I feel once allotments are done,cannot be cancelled.

What are the procedures for allotment of shares?

Process of allotment of shares

  • Confirmation to shareholdings and shareholders ID. …
  • Holding a board meeting. …
  • Updating Companies house for allotment of new shares. …
  • Issuing of new share certificates. …
  • Updating Company’s confirmation statement (CS01) with new share totals.

What is the difference between issue and allotment of shares?

The key difference between allotment and issue of shares is that an allotment is a method of share distribution in a company whereas share issue is the offering of the ownership of the shares to shareholders to hold, and later transfer to another investor.

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What is allotment of shares What are the restrictions on allotment of shares what is the effect of irregular allotment?

It should be remembered that allotment of shares should always be made by the proper authority e.g., by the board of directors, and allotment made without proper authority is void. Although allotment can be delegated to some persons if the Articles so provide.

What is the time limit for allotment of shares?

On passing the resolution for allotment of shares, the allotment of shares must be done within 60 days of receiving the application money for the same.

How are shares transferred?

How to Transfer Shares of a Private Limited Company. … Step 1: Obtain share transfer deed in the prescribed format. Step 2: Execute the share transfer deed duly signed by the Transferor and Transferee. Step 3: Stamp the share transfer deed as per the Indian Stamp Act and Stamp Duty Notification in force in the State.

What is share allotment and forfeiture of shares?

If a shareholder fails to pay the due amount of allotment or any call on shares issued by the company, the Board of directors may decide to cancel his/her membership of the company. … Thus, when a shareholder is deprived of his/her membership due to non payment of calls, it is known as forfeiture of shares.

Why do companies allot shares?

A company may allot shares when it is first set up or at any time during its lifetime in order to raise share capital and/or introduce new shareholders.

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Why do companies issue more shares?

Secondary offerings to raise additional capital: A firm looking for new capital to fund growth opportunities or to service existing debt may issue additional shares to raise the funds. … Smaller businesses sometimes also offer new shares to individuals for services they provide.