Question

________means the appropriation of a certain number of shares to an applicant who has applied shares in public issue by the board of directors in consultation with stock exchange.

• A. Allotment
• B. Application
• C. Acceptance
• D. Final call

Answer 1

The correct option is A Allotment

The allotment of shares is the issuing of new shares to the existing shareholders or to third parties. The Directors of a Company may allot shares in the capital of the Company, if they have the authority to do so. Some examples where allotment of shares may be used are as follows:

• To raise money for the Company

• To introduce new investors such as BES investors

• To allow Enterprise Ireland or Enterprise Board Investors

• To convert loans to share capital

• To introduce a golden share

• To put in place a group structure

• To fund a redemption of shares

• To implement a bonus issue of shares

Directors may not allot shares unless they have the power to do so. The Directors power to allot shares expires 5 years from the date of incorporation or 5 years from the last renewal of the power to allot. If the authority to allot shares has not been renewed in the last 5 years then it should be renewed prior to any proposed allotment. This can be renewed by the Members passing an Ordinary Resolution prior to the allotment.

A company must have sufficient unissued authorised share capital before new shares may be allotted by the Directors. If the Company does not have sufficient unissued share capital or is setting up a new share class this must be approved by the members passing a special resolution.

The Memorandum and Articles of Association and any shareholder agreements should be reviewed for regulations on pre-emption rights, unissued share capital and other provisions that may affect the allotment of shares. The shares may be allotted for cash, non-cash and may be allotted at a premium.