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Allotment of Shares: Step-by-Step Process Explained for Businesses

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Financial Analyst

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Introduction

Allotment of shares is one of the most important corporate actions for any company—whether raising capital, adding new investors, onboarding directors, or issuing ESOPs. The process is strictly regulated under the Companies Act, 2013 and requires compliance with timelines, documentation, and ROC filings.

To help founders, CFOs, and compliance teams, Saving Mantra provides end-to-end support for a seamless and fully compliant share allotment process. Below is a detailed step-by-step breakdown of how the allotment of shares is executed legally and efficiently.

Why Share Allotment Matters?

Share allotment increases the company’s paid-up capital and changes the ownership structure.
A mistake at any stage—valuation, board approval, PAS-3 filing, or share certificate issue—may lead to penalties, delays, or rejection by ROC.

A structured approach ensures:

  • Legal compliance
  • Clean cap-table management
  • Smooth investor onboarding
  • Accurate ROC filings

Step-by-Step Process for Allotment of Shares

Step 1: Determine the Need & Type of Allotment

The company first identifies why new shares are being issued. This could include:

  • Bringing in new investors
  • Increasing authorized capital
  • ESOP allotment
  • Right issue or bonus issue
  • Conversion of loans into equity

Each type has its own regulatory requirements.

Step 2: Check Authorised Share Capital

Before issuing new shares, the company must ensure that its authorised share capital is sufficient.

If not, the company must:

  • Pass a board resolution
  • Amend MOA through a special resolution
  • File Form SH-7

Only after this can shares be allotted.

Step 3: Conduct Board Meeting for Allotment Proposal

A Board Meeting is held to:

  • Consider the proposal for allotment
  • Approve offer letter (PAS-4 if private placement)
  • Fix price as per valuation (if required)
  • Decide allotment timeline

Minutes must be recorded as per secretarial standards.

Step 4: Issue Offer Letter to Proposed Allottees

Depending on the type of allotment:

  • PAS-4 for private placement
  • Letter of Offer for rights issue
  • Board-approved communication for ESOP exercise

The offer letter specifies:

  • Number of shares
  • Price per share
  • Payment method
  • Validity period

Step 5: Collection of Application Money

The allottees submit the share application money through banking channels.
The company must ensure:

  • No cash acceptance
  • Proper entry in the bank statement
  • Maintenance of application money records

This step is critical for compliance verification.

Step 6: Conduct Board Meeting for Actual Allotment

Once share application money is received, a second board meeting is held to:

  • Approve the allotment
  • Finalize list of allottees
  • Approve issuance of share certificates
  • Authorize filing of PAS-3

A Board Resolution for allotment is passed.

Step 7: File PAS-3 (Return of Allotment) with ROC

Within 15 days of allotment, the company must file Form PAS-3.
This includes:

  • List of allottees
  • Board resolution
  • Valuation report (if applicable)
  • PAS-4 & PAS-5 (for private placement)
  • Share capital breakup

ROC updates the master data after successful filing.

Step 8: Issue Share Certificates

Share certificates must be issued within 2 months of allotment.
Mandatory requirements:

  • Certificate in Form SH-1
  • Stamping as per state Stamp Act
  • Entry in the Register of Members
  • Signatures of directors + company secretary (if applicable)

This step legally confirms ownership.

Step 9: Update Statutory Registers

The company updates:

  • Register of Members
  • Register of Share Allotment
  • Share Ledger / Cap Table

This ensures proper record-keeping for future filings, audits, or investor reporting.

Step 10: Compliance Reporting to Stakeholders

Saving Mantra provides consolidated reporting for:

  • Board and investor updates
  • Updated shareholding pattern
  • Updated paid-up capital
  • Documentation repository

This makes governance and transparency easier.

Benefits of Saving Mantra Share Allotment Services

  • 100% ROC Compliance
  • Accurate documentation
  • On-time PAS-3 filing
  • Expert legal and secretarial support
  • Smooth investor onboarding
  • End-to-end digital workflow

Conclusion

Allotment of shares is a critical legal process that impacts ownership, fundraising, and financial compliance. With the right documentation, timely filings, and professional support, companies can complete allotment seamlessly and avoid regulatory complications.

Saving Mantra provides a structured, transparent, and compliant process to ensure your share allotment is error-free and ROC-ready.

The information provided in this blog is for general informational and educational purposes only and should not be construed as legal, tax, or professional advice. While every effort has been made to ensure accuracy and compliance with the applicable provisions of the Companies Act, 2013 and related rules, laws and regulations may change over time and interpretations may vary based on specific facts and circumstances.All services are subject to applicable laws, rules, and government approvals prevailing at the time of execution.

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