Irregular allotment

An allotment is irregular if it is made without complying with the

conditions precedent to a regular allotment as discussed above.
Consequences of irregular allotment depend upon the nature of
irregularity involved. These may be noted as irregularities:
1. Failure to deliver a copy of the prospectus to the Registrar
before its issue.
2. Allotment without raising minimum subscription or without
either collecting application money or collecting less than 5
percent as application money or failure to deliver a copy of
statement in lieu of prospectus at least three days before
allotment.
 Effects of irregular allotment (Section-70)
• Any allotment made contrary to the provisions of the
companies ordinance 1984 relating to the allotment are
voidable at the instance of applicant.
• The applicant can avoid the allotment within 30 days;
– From the date of the holding of the statutory meeting
– From the date of the allotment
• If the company is not required to hold the statutory meeting
• If the allotment is made after the holding of statutory meeting.
Even if company goes into winding up within this period of 30 days, this right to
void allotment is not lost.
Contd…..
• It should be noted that it is the applicant who
has the right to avoid the allotment. The
company can not take the benefit of its own
irregularities and can not avoid the allotment
after it is once made.
Contd…..
• Every officer of the company responsible for
irregular allotment of shares shall, besides
others liabilities, shall be liable to compensate
the company and the allottee for any damages
or losses caused due to such allotment.
Repayment of money received for shares
not alloted (section-71).

• The company within 10 days from shares

subscription date shall decide as to whom shares are
to be allotted
• The amount of unsuccessful applicants shall be
refunded with in 10 days from the decision
 Contd…
• If the refund is not made within 15 days, the directors of the
company will be jointly and severally liable to repay the
amount along with a surcharge at the rate of 1.5% for a
month .
• They are also liable for a fine up to rupees 5000 and further
fine of rupees 100 per day in case of continuing offence.
• However, a director shall not be liable if he proves that
default in making refund was not due to any misconduct or
negligence on his part.
Allotment of shares to be dealt on stock
exchange (Section 72)
Where prospectus states that an application has been made or
will be made for permission of shares to be dealt on any stock
exchange,
• Any allotment of shares shall be void if such application is not
made within 7 days from the date of issue of Prospectus or
• the permission is not granted by stock exchange within 21 days
from the date of closing of subscription lists.
• The stock exchange may extend this period for further 21 days.
Contd…
• In case of contravention to the previous, the
company shall refund all the moneys received
against application within 8 days from such
contravention.
Contd…
• In case the money is not repaid within 8 days, then all the
directors will be jointly and severally liable to repay the amount
with a surcharge at the rate of 1.5% for a month or a part thereof.
• They are also liable for a fine up to rupees 5000 and further fine
of rupees 100 per day in case of continuing offence.
• However, a director shall not be liable if he proves that default in
making refund was not due to any misconduct or negligence on
his part.
Return of Allotment (Sec 73).
• Every company whether public or private and having a share capital ans
within 30 days of allotment is required to send to the Registrar, a document
known as the "Return of Allotment".
• The return of allotment contains various details on allotment of shares such
as the nominal value of shares allotted, names and addresses of allotees,
amount paid or payable on each share
• Particulars of bonus shares and shares issued at discount. The secretary has
to see that these documents are prepared and submitted in time to the
Registrar.
The company shall file with a registrar a return of allotment within 30 days
from the date of allotment. Return of allotment should state and include;
In the case of shares issued in cash

1. The number and nominal amount of shares

allotted;

2. Particulars of each allottee

3. Amount paid on each share.

 In case of shares allotted other then for cash, a duly
verified contract shall be submitted to the registrar,
stating the following
1. The number and nominal amount of shares allotted;
2. The amount to be treated as paid up;
3. Consideration for which they have been allotted
4. In case of contract is not reduce to writing, the
memorandum of contract shall be filed with the registrar.
In case of shares issued at discount

1. Copy of resolution authorizing such issue;

2. Copy of order of commission sanctioning the issue.

In case of bonus shares
1. The number and nominal amount of shares;

2. The particulars of each allottee.

3. A copy of resolution authorizing the issue.