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Types of Securities Allotment_ An In-Depth Analysis

Types of Securities Allotment: An In-Depth Analysis


The allotment of securities, encompassing shares and other financial instruments, plays a pivotal role in corporate financing and governance. It involves the process of assigning a specific number of securities in terms of allotment of securities to applicants, ensuring compliance with stringent legal frameworks. This article provides an in-depth exploration of the procedural and legal aspects of allotment of securities in India, guided primarily by the Companies Act, 2013, Securities and Exchange Board of India (SEBI), SEBI Issue of Capital and Disclosure Requirements) Regulations, 2009 (“SEBI ICDR Regulations”), and the Securities Contracts (Regulation) Act, 1956.

Governing Laws

Public Companies

Public companies, particularly those listed or aiming to list on recognized stock exchanges in India, must adhere to comprehensive regulatory frameworks governing the issuance and allotment of securities. Key laws include:

  • Companies Act, 2013: Provides the foundational legal framework for corporate operations, including the issuance and allotment of securities.
  • Securities Contracts (Regulation) Act, 1956: Regulates stock exchanges and securities trading in India, ensuring fair and transparent markets for allotment of securities
  • SEBI Act, 1992: Empowers the Securities and Exchange Board of India (SEBI) to oversee securities markets, protect investor interests, and regulate securities issuance.
  • Issue of Capital and Disclosure Requirements (SEBI ICDR) Regulations, 2009: Specifies detailed guidelines for public offerings, ensuring disclosure norms and investor protection during allotment of securities processes.

Private Companies

Private companies also engage in the allotment of securities under the Companies Act, 2013, albeit with regulatory oversight managed by different authorities:

  • The administration and regulatory oversight for private companies’ allotment of securities are typically overseen by the Central Government, the Tribunal, or the Registrar of Companies, depending on specific compliance requirements and company structure.

Role of SEBI

Section 24 of the Companies Act, 2013 grants authority to the Securities and Exchange Board of India (SEBI) to oversee the issuance and transfer of securities. SEBI’s responsibilities extend to addressing issues like non-payment of dividends by listed companies or those intending to list. SEBI also regulates matters related to the prospectus, return of allotment, redemption of preference shares, forward dealing, and insider trading for listed entities, ensuring transparency and investor protection.

Allotment of Securities

Minimum Subscription (Section 39)

Under Section 39 of the Companies Act, 2013, the allotment of securities is contingent upon meeting the minimum subscription as outlined in the prospectus. This minimum amount must be fully subscribed within 30 days from the issue date or within a timeline specified by SEBI. Failure to achieve this requirement necessitates the refund of application money within 15 days from the issue’s closure. Directors of the company are accountable for any defaults, subject to an interest rate of 15% per annum.

Return of Allotment (Form PAS-3)

Companies with share capital are mandated to submit a return of allotment to the Registrar within 30 days of the allotment date. This filing, completed using Form PAS-3, includes:

  • A comprehensive list of allottees detailing their names, addresses, occupations, and the number of securities allocated.
  • For securities allotted for considerations other than cash, a stamped copy of the contract.
  • Details of contracts not documented in writing, stamped according to the Indian Stamp Act, 1899.
  • A report from a registered valuer in cases involving considerations other than cash.
  • A copy of the resolution for issuing bonus shares.
  • In cases of rights issues under Section 62, a registered valuer’s report (excluding listed companies).


Failure to comply with the refund or return of allotment obligations attracts penalties of ₹1,000 per day of default, with a maximum cap of ₹1,00,000.

Public Issue and Stock Exchange Permission (Section 40)

Companies conducting public allotments must obtain permission for listing on stock exchanges. The prospectus must explicitly state the stock exchanges where the securities will be traded. All application funds must be segregated in a separate bank account and may only be utilized for allotment adjustments or refunds if the securities are not allocated.

These regulations ensure that the allotment of securities, whether in public or private scenarios, adheres to legal standards, fostering investor confidence and market integrity. Understanding and complying with these provisions are vital for companies to navigate the complexities of securities issuance effectively.

Commission on Subscription

Companies have the option to pay a commission to individuals for securing subscriptions to their securities, provided it meets the following conditions:

  • Authorized by the Articles of Association.
  • Paid from the proceeds of the issue or company profits.
  • Does not exceed 5% of the issue price for shares and 2.5% for debentures.
  • Disclosed in the prospectus, including details of underwriters and commission terms.
  • No commission for securities not offered to the public.
  • A copy of the commission contract must be submitted to the Registrar.

Frequently Asked Questions

What are the different types of allotment of shares?

Public companies can allot shares through public allotment, private placement, rights issue, or bonus shares. Private companies can allot shares through private placement, rights issue, or bonus issue.

How many types of securities are there in India?

The Indian securities market regulated by SEBI oversees three main types of securities: equity securities, debt securities, and hybrid securities. These categories encompass various financial instruments traded in the market.

What is the process of allotment?

Allotment of shares is the procedure by which a company assigns its shares to applicants. This typically occurs after an Initial Public Offering (IPO) or during the issuance of new shares. It formalizes the transition of applicants from potential investors to shareholders of the company.

What is the time limit for allotment of securities?

Companies must complete the allotment of shares within 60 days of receiving the application money, as per the resolution passed for allotment. This ensures timely distribution of shares to committed investors.


The process of securities allotment, covering shares and other instruments, is governed by stringent regulations to ensure transparency and protect investor interests. Detailed in the Companies Act, 2013, and regulated by SEBI for listed companies, these regulations guide every aspect from minimum subscriptions to return filings. Compliance is crucial for navigating the complexities of securities issuance and maintaining market credibility. InstaFiling aids companies in adhering to Companies Act, 2013, and SEBI regulations, ensuring accurate and timely document preparation and filing. Our services streamline the allotment process, mitigate compliance risks, and enhance operational efficiency, empowering businesses to focus on strategic objectives while upholding market trust and credibility.

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