Published Apr 23, 2026 4 mins

Copied!

Overview

The allotment of shares is a critical process in the lifecycle of a company. It signifies the allocation of shares to individuals or entities, granting them ownership in the company. For investors, owning shares is not only a means to build wealth but also an opportunity to participate in a company’s growth and decision-making. However, shares are more than just investment instruments—they can also serve as a valuable financial asset that provides liquidity without the need for liquidation.

The process of share allotment is governed by company law and involves specific legal steps to ensure transparency and compliance. This article explores the meaning, types, processes, and legal framework of share allotment while highlighting its potential as a financial tool for investors.


Need quick access to funds? Use your listed shares to get a loan without selling them. You may be able to unlock significant funds while continuing to hold your investments. Apply now

Allotment of shares meaning

The allotment of shares refers to the process through which a company assigns its shares to individuals or entities, thereby granting them ownership rights. This process is typically carried out when a company issues new shares to raise capital, either during its incorporation or at a later stage.

Under company law, the allotment of shares is a formal procedure that involves issuing shares to applicants who have agreed to purchase them, either through a public offering, private placement, or rights issue. It is important to note that once shares are allotted, the recipient becomes a shareholder and gains certain rights, such as voting rights and dividend entitlements.

Shares, as a financial asset, can also be used as collateral to secure liquidity. A Loan Against Shares (LAS) enables investors to leverage their shareholdings to access funds without selling their investments, ensuring they remain part of the company’s growth journey.

Share allotment process

The process of share allotment is structured to ensure transparency and compliance with legal and regulatory frameworks. Here is a step-by-step breakdown of how shares are allotted:

  1. Offer to subscribe: The company issues a prospectus or offer letter inviting applications for shares.
  2. Application submission: Interested investors submit their applications along with the required application money.
  3. Scrutiny of applications: The company reviews the applications to ensure compliance with eligibility criteria.
  4. Allotment of shares: Once the applications are approved, the company allots shares to the applicants and issues share certificates.
  5. Filing with the registrar: The company files the return of allotment with the Registrar of Companies (RoC) within 30 days of the allotment.

It is crucial for investors to choose quality shares when participating in the allotment process. High-value shares not only offer better returns but can also serve as viable collateral for securing loans, such as a Loan Against Shares (LAS).


Your investment portfolio can do more than just grow over time. It can also help you access liquidity when needed without disturbing your long-term financial strategy. Apply now

Allotment of shares under company law

The allotment of shares is governed by the Companies Act, 2013, in India. Companies must adhere to the following legal requirements to ensure compliance:

  • Board resolution: The board of directors must pass a resolution approving the allotment of shares.
  • Offer letter: For private placements, the company must issue an offer letter to potential investors.
  • Filing of return of allotment: The company must file Form PAS-3 (Return of Allotment) with the Registrar of Companies within 30 days of the allotment.
  • Adherence to SEBI regulations: Listed companies must comply with the Securities and Exchange Board of India (SEBI) guidelines for the allotment of shares.
  • Stamp duty payment: The company must pay the necessary stamp duty on the share certificates issued.

By following these legal steps, companies can ensure transparency and protect the interests of their shareholders.

Allotment of shares vs transfer of shares

While the terms "allotment of shares" and "transfer of shares" are often used interchangeably, they refer to entirely different processes. Below is a comparison to clarify their distinctions:

AspectAllotment of SharesTransfer of Shares
DefinitionIssuance of new shares by the company to investors.Transfer of ownership of existing shares from one person to another.
Initiated byThe company.The shareholder who owns the shares.
PurposeTo raise capital for the company.To change ownership of existing shares.
Legal requirementsGoverned by the Companies Act, 2013.Requires execution of a share transfer deed.

Understanding these differences is crucial for investors, especially those exploring options like Loan Against Shares, where the ownership of shares remains with the investor while they access liquidity.


Instead of selling shares during a temporary cash requirement, many investors prefer leveraging their portfolio to access funds while remaining invested in the market. Apply now

Conclusion

The allotment of shares is a cornerstone of corporate finance, enabling companies to raise capital while offering investors ownership opportunities. Whether you are an entrepreneur, an investor, or a salaried professional, understanding the intricacies of share allotment can help you make informed financial decisions.

Unlock the power of your investments with a Loan Against Shares. Access liquidity without selling your shares and stay invested in your future. Apply now

Frequently asked questions

What is allotment of shares meaning in company law?

The allotment of shares under company law refers to the process by which a company issues its shares to individuals or entities, granting them ownership rights. It involves the allocation of shares to applicants who have agreed to purchase them, either through a public offering, private placement, or rights issue.

What are the different types of allotment of shares?

The key types of share allotment include:

  1. Public allotment: Shares are offered to the public through an Initial Public Offering (IPO).
  2. Private placement: Shares are offered to a select group of investors.
  3. Bonus issue: Additional shares are issued to existing shareholders as a reward.
  4. Rights issue: Shares are offered to existing shareholders at a discounted price.
What is the process of allotment of shares in an IPO?

The process of share allotment in an Initial Public Offering (IPO) typically involves the following steps:

  1. Investors submit applications for shares during the IPO period.
  2. The company evaluates the applications based on demand and eligibility.
  3. Shares are allotted to applicants based on the availability and the subscription level of the IPO.
  4. Successful applicants receive share certificates, while refunds are issued to unsuccessful applicants.
What is the difference between allotment and transfer of shares?

The allotment of shares refers to the issuance of new shares by the company to investors, while the transfer of shares involves the change of ownership of existing shares from one person to another. Allotment is initiated by the company, whereas transfer is initiated by the shareholder.

What rights does an investor get after allotment of shares?

After the allotment of shares, an investor gains several rights, including:

  • Voting rights: The ability to participate in company decisions.
  • Dividend entitlement: The right to receive a share of the company’s profits.
  • Ownership: A stake in the company’s equity.

Investors can retain these rights while accessing liquidity through a Loan Against Shares, ensuring their long-term financial goals are not disrupted.

Show More Show Less

Related Articles

Article 1

Read More

 Article 2

Read More

 Article 3

Read More

Related Videos

What happens if the price of my pledged mutual funds fall
 
 

What happens if the price of my pledged mutual funds fall

Get Easy Loans on Securities
 
 

Get Easy Loans on Securities

Features and benefits of a Loan Against Shares.mp4
 
 

Features and benefits of a Loan Against Shares.mp4

Know the different types of securities in India
 
 

Know the different types of securities in India

You are here

Related Links

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (BAJAJ FINANCE) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same. 

Download app image