ALLOTMENT 

Allotment of Shares

Meaning

Allotment of shares is the process of distributing newly issued shares to applicants. It creates a binding contract between the company and shareholders.

Legal Provisions under Companies Act, 2013

• Section 39: States that shares cannot be allotted unless the minimum subscription is received.
  
  

• Section 42: Regulates private placement of shares.
  
  

• Section 62: Governs preferential allotment and rights issues.
  
  

Conditions for Valid Allotment

1. Application by Investor – Investors must apply for shares.
   
   

2. Minimum Subscription – At least 90% of the issue must be subscribed (Section 39).
   
   

3. Proper Authority – The Board of Directors must approve the allotment.
   
   

Indian Case Law: LIC v. Escorts Ltd. (1986)

• The Supreme Court ruled that share allotment should be fair and transparent, ensuring no favoritism.