What do you understand by allotment of share ? What allotment ? State the effect of irregular allotment.
Meaning and Definition of Allotment of Shares
The meaning of allotment of shares is the appointment of a certain number of shares by the Board of Directors to a person for which he has applied. Allotment of shares means that the company has accepted the offer and entered into an agreement with the person who has made the application. The allotment should be unconditional. The intimation of allotment should be sent to the applicant in due course. The applicant can withdraw the offer of his shares at any time before the allotment. The allotment should be as per the same conditions as given in the application form.
Pro. According to Palmer, “Allotment of shares means the distribution of a certain number of shares to any person who has sent an application for shares on the basis of a resolution passed by the Board of Directors.”
It is thus clear that the process of accepting the purchase offer of shares received from the public by the directors of the company is called allotment of shares. It should be remembered that issue of forfeited shares by the company is not an allotment.