Board resolution for share allotment

When you need this

• On completing any funding round, to allot shares against subscription money received
• When issuing shares to a founder or an early employee
• On conversion of a convertible instrument into equity
• Where a rights issue or preferential allotment is being implemented
• Before the statutory filings and the register entries that follow allotment

What this document must contain

• Meeting particulars and quorum — Date, time, place or mode, directors present and confirmation of quorum. A resolution passed without quorum is vulnerable.
• Recitals establishing authority — Reference to the shareholder approval where required, the offer letter, and the section under which the allotment is made. This is what shows the procedure was followed.
• Confirmation that subscription money was received — With amount, date and mode. Allotment before receipt is a defect that surfaces later.
• The operative allotment — Allottee names, number and class of shares, face value and premium. Precision here, since this is what the register will reflect.
• Authorisation to issue certificates and make filings — Names who signs share certificates and who makes the statutory filings, so the follow-through does not stall.
• Register updates — Directing that the register of members and related registers be updated. Registers that lag the resolutions are a standard diligence finding.

The law that governs it

• Companies Act, 2013 — s. 62 — Further issue of share capital must follow the procedure prescribed, which differs between a rights issue, an issue to employees under a scheme and a preferential allotment to any other person.
• Companies Act, 2013 — s. 179 — The power to issue securities is exercised by the board by means of resolutions passed at meetings of the board, which is why the allotment is recorded as a board resolution.
• Companies Act, 2013 — s. 56 and the filing regime — Share certificates must be delivered within the period the Act prescribes, and allotment is followed by statutory filings with the Registrar. Missing filings attract additional fees that accrue per day.

Common mistakes

• Allotting before the subscription money has actually been received
• Recording the resolution without the recitals that show the s. 62 procedure was followed
• Missing the subsequent statutory filings, where late fees accrue daily under s. 403
• Not updating the register of members, so the statutory record and the cap table diverge
• Omitting the premium from the resolution, leaving the accounting entry unsupported

Frequently asked questions

Can shares be allotted by a board resolution alone?

The board passes the allotment resolution under s. 179 of the Companies Act, 2013, but the underlying issue may first require shareholder approval depending on the route taken under s. 62. A preferential allotment in particular carries its own approval and procedural requirements, which the resolution's recitals should reflect.

What filings follow an allotment?

Allotment is followed by statutory filings with the Registrar of Companies within prescribed periods, along with issue of share certificates and updates to the register of members. The specific forms and timelines should be confirmed against the current rules.

What happens if the filing is late?

Section 403 of the Companies Act, 2013 provides for additional fees on late filing, and the exposure accrues at ₹100 per day per form with no upper limit. On an old default that quietly reaches lakhs, because it never stops accruing.

Can shares be allotted before the money is received?

Allotment should follow receipt of the subscription money. Allotting first creates a defect that is routinely picked up in diligence, and the resolution should record the amount, date and mode of receipt precisely because that is what a later reader will check.

Related documents

• Non-Binding Term Sheet
• Shareholders' Agreement
• All templates