When a company receives an application for shares issued by means of prospectus, it proceeds to allot shares on predetermined. Where applications exceed the shares available, allotment is made proportionally, though often applications for shares up to a stated number are accepted in full. The allotment of shares is made by means of a letter of allotment. This entitles the recipient to a certificate for the number of shares stated in the letter.
Right issue
A company may invite its existing shareholders to subscribe for the further shares in order to raising capital. If the allotment of shares is made to all existing shareholders in pro rata to their existing share holdings, the company's board of directors has the power to approve the allotment without granting the approval of the general meeting.
Directors' powers of allotment
The directors of a company must first obtain the approval from the shareholders of the company in a general meeting before exercising the power of allotment of shares. The approval may specify that the offer, agreement, or option to allot shares will be made within the approval time.
Issuing of share certificates
The allottee becomes a member of the company when his name is entered on the register of members. The company should issue a new share certificate to the new member within two months after the allotment of shares.
Documents required for the allotment of shares
• A copy of the Articles of Association;
• A copy of the latest Annual Return;
• A copy of the passport of the new shareholders;
• A copy of residential address proof of the new shareholders;
• The Register of Members.
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