Allotment of shares.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 Dear All,

There are two shareholders in a Private Company A & B. The Company intends to issue and allot further shares to A. In this case whether this allotment is preferential allotment or not? Accordingly is a general meeting required or Board meeting would suffice?

Regards & Thanks.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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07 August 2012 “preferential allotment” means allotment of shares on preferential basis made pursuant to the provisions of subsection
(1A) of section 81 of the Companies Act, 1956.

Section 81 (1A) shall not apply to private companies.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 Thanks Mitesh,

But the auditors are saying that in case of allotment to one of the two shareholders, it will be treated as preferential allotment and it will be highlighted in the Audit Report. Please guide.

Thanks & Regards

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CA Sumiit B Nagpal

CA Sumiit B Nagpal (Expert)
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07 August 2012 Allotment has to be made by the directors in Board Meeting. Subject to the articles,offer will be given to both the shareholders i.e. A & B , then A can accept the offer & can allot himself further shares. But as Expert said Section 81(1A) is not applicable to private companies.