Share Allotment

Shares can be acquired either directly from the company itself (share allotment) or from an existing shareholder (share transfer).

When shares are created they are 'allotted' or 'issued' to those people or other companies who become the company's shareholders.

‘Allotment’ is the allocation of the right to certain shares to particular applicants for them. Such 'allottees' may be sent allotment letters. The actual issue of the shares occurs later. In most private companies allotment and issue will be the same process.)

Allotments are made by the directors, but there are various statutory rules and procedures which must be complied with, as well as any provisions in the company's articles.

In private companies the allotment will be a private arrangement between the company and those who invest in it.

Subject to such restrictions as appear in the company's memorandum and articles, a shareholder may sell his or her shares to another person.

If a shareholder dies, there is said to be a 'transmission' of the shares

Shares may be allotted to: 

Raise money 
Introduce new investors
Convert loans to share capital
Organise a group structure
Fund a share redemption

This issues new shares to existing shareholders or third parties, providing the company has sufficient unissued authorised share capital. The Directors of a Company may allot shares in the capital of the Company if they have the authority to do so. This authority is expressed in the Companies Memorandum & Articles of Association. The Memorandum & Articles of Association and shareholder agreements should be reviewed first.

The shares may be allotted for cash, non-cash and may be allotted at a premium.

The new shareholders must apply for shares to be allotted to them; the Directors must approve the allotment of shares, write up the Register of Allotments and Register of Members and file the form B5 with the CRO. New share certificates should be issued to the new shareholders.