How do companies allot shares?
A person becomes a shareholder of a Company either by shares being allotted, transferred or transmitted to him/her.
What is allotment? A company may allot shares when it is first set up or at any time during its lifetime in order to raise share capital and/or introduce new shareholders. Who can allot shares? Unless the Investments and Securities Act provides otherwise, the power to allot shares shall be vested in the Company, which may delegate it to directors, subject to any conditions or directions that may be imposed in the articles or from time to time by the company in general meeting.
In the case of a private company or a public company where the issue of shares is not public, there shall be submitted to the company a written application signed by the person wishing to purchase shares and indicating the number of shares required;
In the case of a public company, subject to any conditions imposed by the Securities and Exchange Commission where the issue of shares is public, there shall be returned to the company a form of application as prescribed in the company’s articles, duly completed and signed by the person wishing to purchase shares;
Upon the receipt of an application, a company shall, where it wholly or partially accepts the application, make an allotment to the applicant and within 42 days after the allotment notify the applicant of the fact of allotment and the number of shares allotted to him.
An allotment of shares made and notified to an applicant shall be an acceptance by the company of the offer by the applicant to purchase its shares and the contract takes effect on the date on which the allotment is made by the company. A company may, in its articles, make provision with respect to payments on allotment of its shares.
Whenever a company limited by shares makes any allotment of its shares, the company shall within one month thereafter deliver to the Commission for registration‐
(a) a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and description of the allottees, and the amount, if any, paid or due and payable on each share and
(b) in the case of shares allotted as fully or partly paid up otherwise than in cash‐
(i) a contract in writing, constituting the title of the allottee to the allotment together with any contract of sale, or for services or other consideration in respect of which that allotment was made, such contracts being duly stamped
(ii) a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted and
(iii) particulars of the valuation of the consideration
(iv) If default is made in complying, every officer of the company who is in default shall be liable to a fine of N50 for every day during which the default continues:
Provided that, in case of default in delivering to the Commission within one month after the allotment any the court for relief, and the court, if satisfied that the omission to deliver the document was accidental or due to inadvertence or that it is just and equitable to grant relief, may make an order extending the time for the delivery of the document for such period as the court may think proper.
Reference- S.124-127, 129 CAMA
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