{"id":13307,"date":"2020-09-24T16:44:28","date_gmt":"2020-09-24T11:14:28","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=13307"},"modified":"2020-11-24T18:34:54","modified_gmt":"2020-11-24T13:04:54","slug":"preferential-allotment-of-equity-shares","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/","title":{"rendered":"Preferential Allotment of Equity Shares: A Complete Guide"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The term \u201cPreferential Allotment of Equity Shares\u201d denotes a process in which a company allots shares to the individuals, companies, and venture capitalists at a pre-determined price.<\/p>\n\n\n\n<p>Further, these shares are mainly made to the individuals who want to acquire a majority or strategic stake in the company.<\/p>\n\n\n\n<p>In this blog, we will discuss the concept of Preferential Allotment of Equity Shares, together with the Reasons and the Procedure for the same.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a2275be415\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a2275be415\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Concept_of_Preferential_Allotment_of_Equity_Shares\" title=\"Concept of Preferential Allotment of Equity Shares\">Concept of Preferential Allotment of Equity Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Which_Companies_are_Eligible_for_Preferential_Allotment\" title=\"Which Companies are Eligible for Preferential Allotment?\">Which Companies are Eligible for Preferential Allotment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Reasons_to_Opt_for_Preferential_Allotment_of_Shares\" title=\"Reasons to Opt for Preferential Allotment of Shares\">Reasons to Opt for Preferential Allotment of Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Regulatory_Framework_for_Preferential_Allotment\" title=\"Regulatory Framework for Preferential Allotment\">Regulatory Framework for Preferential Allotment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Securities_Covered_Under_Preferential_Allotment\" title=\"Securities Covered Under Preferential Allotment\">Securities Covered Under Preferential Allotment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Benefits_of_the_Preferential_Allotment\" title=\"Benefits of the Preferential Allotment\">Benefits of the Preferential Allotment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Forms_Required_for_Preferential_Allotment_of_Equity_Shares\" title=\"Forms Required for Preferential Allotment of Equity Shares\">Forms Required for Preferential Allotment of Equity Shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Form_MGT_14\" title=\"Form MGT 14\">Form MGT 14<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Form_PAS_3\" title=\"Form PAS 3\">Form PAS 3<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Procedure_for_the_Allotment_of_Equity_Shares\" title=\"Procedure for the Allotment of Equity Shares \">Procedure for the Allotment of Equity Shares <\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Notice_of_the_Board_Meeting\" title=\"Notice\nof the Board Meeting\">Notice\nof the Board Meeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Hold_a_Board_Meeting\" title=\"Hold a Board\nMeeting\">Hold a Board\nMeeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Open_a_Separate_Bank_Account\" title=\"Open a Separate\nBank Account\">Open a Separate\nBank Account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Convene_an_EGM\" title=\"Convene an EGM\">Convene an EGM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#File_MGT-14_and_PAS-4_with_ROC\" title=\"File MGT-14 and\nPAS-4 with ROC\">File MGT-14 and\nPAS-4 with ROC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Dispatch_Application_for_Private_Placement\" title=\"Dispatch\nApplication for Private Placement\">Dispatch\nApplication for Private Placement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Payment_of_the_Subscription_Money\" title=\"Payment of the Subscription\nMoney\">Payment of the Subscription\nMoney<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Deposit_of_the_Money_Received\" title=\"Deposit of the\nMoney Received\">Deposit of the\nMoney Received<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Hold_a_Board_Meeting-2\" title=\"Hold a Board\nMeeting\">Hold a Board\nMeeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#File_PAS-3_with_ROC\" title=\"File PAS-3 with\nROC\">File PAS-3 with\nROC<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/swaritadvisors.com\/learning\/preferential-allotment-of-equity-shares\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Preferential_Allotment_of_Equity_Shares\"><\/span>Concept of Preferential Allotment of Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, if an existing company wants to expand its\noperation and affairs, it can raise funds in the manner as follows:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Modes-of-Raising-Funds-by-a-Company-1024x768.png\" alt=\"Preferential Allotment of Equity Shares\" class=\"wp-image-13309\" width=\"507\" height=\"380\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Modes-of-Raising-Funds-by-a-Company-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Modes-of-Raising-Funds-by-a-Company-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Modes-of-Raising-Funds-by-a-Company-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Modes-of-Raising-Funds-by-a-Company.png 1200w\" sizes=\"(max-width: 507px) 100vw, 507px\" \/><\/figure><\/div>\n\n\n\n<ol><li>Issue of Right\nShares to the Existing Shareholders;<\/li><li>Issue of Bonus\nShares to the Existing Shareholders;<\/li><li>Initial Public\nOffer (IPO); and<\/li><li>Preferential\nAllotment;<\/li><\/ol>\n\n\n\n<p>Further, the term \u201c<strong><em><a href=\"https:\/\/swaritadvisors.com\/preferential-allotment\">Preferential Allotment<\/a><\/em><\/strong>\u201d denotes the issuance of shares to a group of individuals at a pre-determined price. Further, this option allows the company to acquire Equity Participation from those whom it considers as being valuable as shareholders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Which_Companies_are_Eligible_for_Preferential_Allotment\"><\/span>Which Companies are Eligible for Preferential Allotment?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Companies-that-Eligible-for-Preferential-Allotment-1024x768.png\" alt=\"Eligible for Preferential Allotment\" class=\"wp-image-13310\" width=\"460\" height=\"345\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Companies-that-Eligible-for-Preferential-Allotment-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Companies-that-Eligible-for-Preferential-Allotment-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Companies-that-Eligible-for-Preferential-Allotment-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Companies-that-Eligible-for-Preferential-Allotment.png 1200w\" sizes=\"(max-width: 460px) 100vw, 460px\" \/><\/figure><\/div>\n\n\n\n<p><strong>The companies eligible for the Preferential Allotment of Equity Shares are as follows:<\/strong><\/p>\n\n\n\n<ol><li><strong><a href=\"https:\/\/swaritadvisors.com\/private-limited-company-registration\" class=\"text-primary\">Private Limited Company<\/a><\/strong>;<\/li><li><strong><a href=\"https:\/\/swaritadvisors.com\/public-limited-company-registration\" class=\"text-primary\">Public Limited Company<\/a><\/strong>;<\/li><li>Listed Company; <\/li><li>Unlisted Company; and <\/li><li><strong><a href=\"https:\/\/swaritadvisors.com\/section-8-company-registration\" class=\"text-primary\">Section 8 Company<\/a><\/strong>; <\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_to_Opt_for_Preferential_Allotment_of_Shares\"><\/span>Reasons to Opt for Preferential Allotment of Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares-1024x1024.png\" alt=\"Opt for Preferential Allotment of Shares\" class=\"wp-image-13311\" width=\"524\" height=\"524\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares-1024x1024.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares-150x150.png 150w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares-300x300.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares-768x768.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Reasons-to-Choose-Preferential-Allotment-of-Shares.png 1200w\" sizes=\"(max-width: 524px) 100vw, 524px\" \/><\/figure><\/div>\n\n\n\n<p><strong>The reasons to opt for Preferential Allotment of Shares are as follows:<\/strong><\/p>\n\n\n\n<ol><li>To provide a\nroute to the shareholders who were not able to purchase shares during IPO;<\/li><li>To assist the\ncompany in obtaining Equity Participation;<\/li><li>To assist in\nRaising Funds;<\/li><li>To increase the\nCapital Flow in the economy;<\/li><li>To increase the\namount of Share Capital in a company; <\/li><li>To offer an\noption of to the following for increasing stake in the company:<\/li><li>Promoters;<\/li><li>Venture\nCapitalists;<\/li><li>Financial\nInstitutions;<\/li><li>Buyers;<\/li><li>Suppliers;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulatory_Framework_for_Preferential_Allotment\"><\/span>Regulatory Framework for Preferential Allotment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Regulatory-Framework-for-Preferential-Allotment-1024x768.png\" alt=\"Regulatory Framework for Preferential Allotment\" class=\"wp-image-13312\" width=\"496\" height=\"372\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Regulatory-Framework-for-Preferential-Allotment-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Regulatory-Framework-for-Preferential-Allotment-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Regulatory-Framework-for-Preferential-Allotment-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Regulatory-Framework-for-Preferential-Allotment.png 1200w\" sizes=\"(max-width: 496px) 100vw, 496px\" \/><\/figure><\/div>\n\n\n\n<p>The <strong><em>Regulatory Framework<\/em><\/strong> for the <strong><em>Preferential\nAllotment<\/em><\/strong> of Equity Shares are as follows:<\/p>\n\n\n\n<ol><li>Section 62 of\nthe Companies Act 2013;<\/li><li>Section 42 of\nthe Companies Act 2013;<\/li><li>Rule 13 of the\nCompanies (Share Capital and Debenture) Rules 2014;<\/li><li>Rule 14 of the\nCompanies (Prospectus and Allotment of Securities) Rule 2014;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Securities_Covered_Under_Preferential_Allotment\"><\/span>Securities Covered Under Preferential Allotment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment-1024x1024.png\" alt=\"Securities Covered Under Preferential Allotment\" class=\"wp-image-13314\" width=\"421\" height=\"421\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment-1024x1024.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment-150x150.png 150w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment-300x300.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment-768x768.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Securities-Covered-Under-Preferential-Allotment.png 1200w\" sizes=\"(max-width: 421px) 100vw, 421px\" \/><\/figure><\/div>\n\n\n\n<p>The <strong><em>Securities Covered<\/em><\/strong> under <strong><em>Preferential\nAllotment<\/em><\/strong> are as follows:<\/p>\n\n\n\n<ol><li>Equity Shares;<\/li><li>Fully\nConvertible Debentures;<\/li><li>Partly\nConvertible Debentures;<\/li><li>Any other\nSecurity that is Converted or Exchanged into Equity Shares;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_the_Preferential_Allotment\"><\/span>Benefits of the Preferential Allotment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The benefits of the Preferential Allotment of Equity Shares are as follows:<\/strong><\/p>\n\n\n\n<ol><li>No Brokerage Cost Involved;<\/li><li>Preference Shareholder are given Preference over Shareholders at the time of Winding Up;<\/li><li>Preference Shareholders have a Right to Claim \u201c<strong>Unpaid Dividend<\/strong>\u201d;<\/li><li>Safer than Issuance of Equity Shares;<\/li><li>Preference Shareholders are paid first in the case of Bankruptcy and Insolvency;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Forms_Required_for_Preferential_Allotment_of_Equity_Shares\"><\/span>Forms Required for Preferential Allotment of Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>The forms required for the Preferential Allotment of Equity Shares are as follows:<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Form_MGT_14\"><\/span>Form MGT 14<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A Company requires to file MCA <strong><a href=\"https:\/\/swaritadvisors.com\/learning\/form-mgt-14\/\" class=\"text-primary\">Form MGT 14<\/a><\/strong> when it needs to pass Shareholders Resolution in the Annual General Meeting (AGM) or Extraordinary General Meeting (EGM). Further, the directors must file this form with the Registrar of Companies (ROC) within 30 days commencing from the date of resolution. <\/p>\n\n\n\n<p><strong>Moreover, the requirements of Form MGT 14 are as follows:<\/strong><\/p>\n\n\n\n<ol><li>A copy of the SR\n(Special Resolution);<\/li><li>Explanatory\nStatement;<\/li><\/ol>\n\n\n\n<p>However, it shall be relevant to note that the\ncertified copies of both documents are required for the process of Preferential\nAllotment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Form_PAS_3\"><\/span>Form PAS 3<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The directors of the \u201cIssuer Company\u201d required to file the \u201cReturn of Allotment\u201d in Form PAS-3 with the Registrar of Companies (ROC) within 15 days from the date of Allotment.<\/p>\n\n\n\n<p><strong>Further, the documents required with Form PAS 3 are as follows:<\/strong><\/p>\n\n\n\n<ol><li>List of\nAllottees;<\/li><li>A copy of SR\n(Special Resolution);<\/li><li>Explanatory\nStatement;<\/li><li>Valuation\nReport;<\/li><li>A copy of the\nContract signed, in the case of \u201cIssue of Shares for Consideration other than\nCash\u201d;<\/li><li>A copy of the\nBooks of Account regarding the offer of Private Placement;<\/li><li>A copy of the\nAcceptance filed in Form PAS 5;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_the_Allotment_of_Equity_Shares\"><\/span>Procedure for the Allotment of Equity Shares <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Allotment-of-Equity-Shares-1024x853.png\" alt=\"Procedure for the Allotment of Equity Shares \" class=\"wp-image-13313\" width=\"527\" height=\"439\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Allotment-of-Equity-Shares-1024x853.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Allotment-of-Equity-Shares-300x250.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Allotment-of-Equity-Shares-768x640.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Allotment-of-Equity-Shares.png 1200w\" sizes=\"(max-width: 527px) 100vw, 527px\" \/><\/figure><\/div>\n\n\n\n<p><strong>The steps involved in the procedure for the Allotment of Equity Shares are as follows:<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Notice_of_the_Board_Meeting\"><\/span>Notice\nof the Board Meeting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the first step, the company needs to send a\nnotice for Board Meeting at least 7 days before the date of Meeting.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hold_a_Board_Meeting\"><\/span><strong>Hold a Board\nMeeting<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the date of the Board Meeting, the Directors of\nthe Company need to discuss and pass a resolution on the issues as follow:: <\/p>\n\n\n\n<ol><li>To analyze the \u201c<strong>Valuation Report<\/strong>\u201d as received from the \u201cRegistered Valuer\u201d;<\/li><li>To fix the list of allottees (It shall be relevant to note that an issuer company can send an invitation to only 50 people \u201cat a time\u201d and 200 in \u201caggregate\u201d in a financial year. However, such an invitation will be exclusive of Qualified Institutional Buyer (QIBs);<\/li><li>To decide a Date, Day, Venue, and Time of the Extraordinary General Meeting (EGM);<\/li><li>To settle the Offer Period;<\/li><li>To approve Letter of Offer in accordance with Form PAS 4;<\/li><li>To make a decision on the Agenda in the Notice, together with the Explanatory Statement for an Extraordinary General Meeting;<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Open_a_Separate_Bank_Account\"><\/span><strong>Open a Separate\nBank Account<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, in the next step, the directors of the company\nneed to open a separate Current Bank Account to receive the total application\nmoney.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Convene_an_EGM\"><\/span><strong>Convene an EGM<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the shareholders of the company need to pass a\nSpecial Resolution (SR) for allowing the process of Preferential Allotment of\nEquity Shares at the EGM.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"File_MGT-14_and_PAS-4_with_ROC\"><\/span><strong>File MGT-14 and\nPAS-4 with ROC<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After passing the Special Resolution (SR) at the\nEGM, the directors need to file MCA form MGT 14 with the Registrar of\nCompanies, India (ROC), and then require to file the \u201cApplication Cum Offer\nLetter\u201d for the process of Private Placement in form PAS 4.<\/p>\n\n\n\n<p>Further, the directors will dispatch the application\nto the \u201cproposed allottees\u201d, along with the documents as follows:<\/p>\n\n\n\n<ol><li>A Copy of the\nSR&nbsp; (Special Resolution);<\/li><li>Explanatory\nStatement;<\/li><\/ol>\n\n\n\n<p>However, it shall be relevant to note that the certified copies of both documents are required for the process of Preferential Allotment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Dispatch_Application_for_Private_Placement\"><\/span><strong>Dispatch\nApplication for Private Placement<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the directors require to send the \u201cApplication Cum Offer Letter\u201d for Private Placement to all the \u201cProposed Allottees\u201d at least 3 days prior to the opening of the issue. <\/p>\n\n\n\n<p><strong>Further, they need to send the application within 30 days, starting from the date of passing SR in either of the methods as follows:<\/strong><\/p>\n\n\n\n<ol><li>Registered Post;<\/li><li>Speed Post;<\/li><li>Courier;<\/li><li>E-mail;<\/li><li>Hand Delivery;<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Payment_of_the_Subscription_Money\"><\/span><strong>Payment of the Subscription\nMoney<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Under this step, all the proposed allottees need to\nsubscribe the shares offered to them in \u201cApplication Cum Offer Letter\u201d for\nPrivate Placement. <\/p>\n\n\n\n<p>Further, the allottees need to pay the \u201cSubscription\nMoney\u201d either by DD (Demand Draft)\/ Cheque\/ or by any other mode of banking.\nHowever, it shall be relevant to note that the allottees are not permitted to\npay \u201cSubscription Money\u201d in cash.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Deposit_of_the_Money_Received\"><\/span><strong>Deposit of the\nMoney Received<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the directors need to deposit or submit all the\nmoney received as \u201cApplication Money\u201d in the current bank account opened.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hold_a_Board_Meeting-2\"><\/span><strong>Hold a Board\nMeeting<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After that, the company requires to hold a Board\nMeeting (BM) for the preferential allotment of equity shares within 60 days,\nstarting from the receipt of share application money.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"File_PAS-3_with_ROC\"><\/span><strong>File PAS-3 with\nROC<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Lastly, the directors require to file MCA Form PAS 3\nwith the ROC (Registrar of Companies) within 15 days, starting from the date of\npreferential allotment of equity shares.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term \u201cPreferential Allotment of Equity Shares\u201d denotes a process in which a company allots shares to the individuals, companies, and venture capitalists at a pre-determined price. Further, these shares are mainly made to the individuals who want to acquire a majority or strategic stake in the company.<\/p>\n\n\n\n<p>Moreover, this option allows the company to acquire\nEquity Participation from those whom it considers as being valuable as\nshareholders.<\/p>\n\n\n\n<p>However, it shall be noteworthy to note that the process of preferential allotment is an intricate and lengthy process, and includes a lot of documentation and approvals. At <strong><em><a href=\"https:\/\/swaritadvisors.com\/\" class=\"text-primary\">Swarit Advisors<\/a><\/em><\/strong>, we have a team of experts who are proficient and experienced in the field of Corporate Laws. They will not only provide a lucid understanding of the concept but will ensure successful completion of the work as well.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read, Also<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/cross-border-mergers-and-acquisitions-in-india\/\">Cross Border Mergers and Acquisitions in India: A Complete Guide<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term \u201cPreferential Allotment of Equity Shares\u201d denotes a process in which a company allots shares to the individuals, companies, and venture capitalists at a pre-determined price. Further, these shares are mainly made to the individuals who want to acquire a majority or strategic stake in the company. In this blog, we will discuss the [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":13308,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[546],"tags":[944],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13307"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=13307"}],"version-history":[{"count":7,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13307\/revisions"}],"predecessor-version":[{"id":16654,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13307\/revisions\/16654"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/13308"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=13307"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=13307"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=13307"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}