Company Law Content
ALLOTMENT OF SHARES
- Section 28 of Nepalese Company Act.
- Allotment is the process of distributing and selling of shares by company for the persons who are going to be future shareholders of the company.
- Prospectus issued by the company is the invitation to the public to apply for the shares of the company.
- On the basis of invitation the persons apply to the company for its shares.
- An application for shares is an offer from the applicant to purchase the shares.
- When such application is accepted by company that is called an allotment.
- Allotment is the appropriation of shares to a particular person, out of the previously inappropriate capital of the company.
- So, allotment is the fresh issue of shares by company.
- It is a binding contract between the company and shareholders.
- The rules of offer and acceptance of contract law are applied in allotment process.
- The company must make a decision of allotment to go in public. The board fixes certain reasonable time frame to pay the share amount.
- General rules of allotment; – 1) the allotment must be made by proper authority e.g. board of directors, or delegated authority.2) the allotment must be communicated. – to the applicant e.g. postal communication, public notice.3) there should be a reasonable time for application.4) the allotment must be unbiased and absolute.4) There must be clear terms and conditions in application itself.
- The allotment process must be mentioned in MoA and AoA as per the legal provisions of the companies Act 2006.
- The allotment is done privately in case of private company, not publicly, private company cannot make public offer for allotment, if made that is punishable by section 160(q).
- Respective legal provision of allotment is sections 28 of the Companies Act 2006 of Nepal