Preferential Shares Archives

"What is Preferential Allotment and What is Preferential Issue of Shares?" And Process for Preferential Allotment of Shares Introduction Existing businesses in India have three options for expanding their operations and raising money. Existing shareholders may receive right or bonus shares in proportion to the number of shares they own, as well as an initial public offering and preferential allotment. In this article information on "What is Preferential Allotment?", "What is Preferential issue of Shares?" And other information on Preferential Allotment of Shares According to Company Law is discussed. What is Preferential Allotment? Preferential allocation refers to a company's bulk allotment of newly issued shares to individuals, venture capitalists, and businesses at a pre-determined price. Typically, a corporation will provide people who wish to buy a strategic position in the company with preferential treatment. This includes existing shareholders who desire to grow their position in the company, such as venture capitalists, financial institutions, promoters, suppliers, or buyers. As a result, preferential allotment enables the company to obtain equity participation from individuals who it regards to be valuable shareholders. Preferential allotment is available to any Firm, whether Private Limited Company or Public Company, listed or unlisted, and even section 8 Companies. What is Preferential Issue of Shares? The Preference Shares are the Company's shares held by individuals who have the sole right to enjoy the Company's profits before the company's other regular shareholders. Furthermore, the Preference Shareholders have the right to have their capital reimbursed if the Company has to close down or fails in the future. As a result, the danger of loss is greatly reduced. A preferred issue is when a company issues shares or securities to a chosen set of investors. It is neither a Right Issue or a Public Issue that the Preferential Issue is. In comparison to other fund-raising approaches, the Preferential Issue of Shares is a one-of-a-kind method. The whole Allotment of Shares is made to a pre-identified person, who may or may not be existing shareholders of the Company, in a Preferential Issue of Shares. Forms that are filed for Preferential Allotment of Shares Form Purpose Time Period Form PAS-3 For the purpose of return of allotment shares. Within 15 days of the allotment date List of allotees certified authentic copy of Board resolution. Form MGT-14 Fro passing a special resolution for the preferential allotment. Within 30 days of the resolution's passage, a certified true copy of the Special resolution, as well as an explanation, must be submitted. Reasons for Preferential Allotment of Shares by Company Help in the company in securing equity participation. To assist the company in raising funds. Preferential Allotment increases the flow of capital in the economy. To provide an option for venture capitalists, promoters, financial institutions, suppliers, or buyers to increase their stake in the company. Advantages of Preferential Allotment of Shares Preference stockholders' capital is always safe. If the company fails or goes bankrupt, than preference stockholders will be compensated first among all other shareholders. There are no trading fees, and preferential shareholders get paid first when the company makes a profit, followed by regular shareholders. If a corporation does not pay a dividend this year, shareholders have the right to demand it in subsequent years. Raising money through a preference issue saves money and time compared to a public issue. More importantly, if the company in question is not doing well at the time but requires capital, retail investors may be hesitant to take part in the issue, at that time Preferential Allotment of shares proves advantageous for the company. Process for Preferential Allotment of Shares Arrange Company's Board Meeting The notice for the Board Meeting shall be sent to all members seven days before the meeting, as required by Section 173 of the Companies Act, 2013. The agenda for the Board Meeting should be included in the notification of the meeting. The notice should also include a draught resolution from the Board Meeting. The following agendas will be considered at the Board Meeting: To provide any Director the authority to call an EGM. The valuation report's evaluation. There will be a set number of allotees. Resolution authorising the issuance of preferential shares. The Extraordinary General Meeting (EGM) will be scheduled for a specific time, date, location, and day. The Offer Letter Draft will be prepared. The EGM notification, as well as the Explanatory Statement, will be completed. The approval of the Offer Letter Resolution will be passed. Letter of Offer The authorised Letter of Offer will be circulated after the members of the EGM pass the Special Resolution. The Letter of Offer is accompanied by an application form that is serially numbered and addressed particularly to the person to whom the offer of Preferential Shares is made. The offer letter should be written or submitted electronically. Within 30 days of the EGM, the Letter of Offer should be issued. Filing of Form MGT 14 The Registrar of Companies should receive Form MGT-14 (RoC). Within 30 days of the Company's passing of the Special Resolution in EGM, the Form MGT-14 must be filed. The MGT-14 Form should be used to make the following attachments: The EGM notice, along with an explanation. Extraordinary General Meeting minutes are available here. The authentic certified copy of the Company's Special Resolution passed at the EGM. Separate Bank Account For the following reasons, a separate bank account should be opened: Payment for securities subscriptions should be done from the individual who is subscribing to the securities' bank account. The Company should keep track of the bank account where payments for securities subscriptions are made. Filing of Form with ROC Following the distribution of the Letter of Offer, the Registrar of Companies will receive the Form. The form must be submitted within 30 days of the Letter of Offer's distribution. Filing of Form PAS 3 Form PAS-3 will be filed with the Registrar of Companies after the second Board Meeting (RoC). Within 15 days after the second Board Meeting, the Form PAS-3 should be approved. The following attachments should be attached to the PAS-3 form: The complete list of all allottees. The explanatory statement was passed along with the actual certified copy of the Special Resolution. A real certified copy of the Board of Directors' Share Allotment Resolution. The contract's original copy. Share Certificate Within two months of the date of the allotment of shares, the shareholders will get their Share Certificates. Stamp duty must be paid in accordance with state regulations. Following the distribution of share certificates to shareholders, the Members' Register should be updated. Conclusion The process of allotting shares and securities on a preferential basis to a specified group of investors is known as the issue of preferential shares. Preferential Allotment of Shares differs from other approaches in that the full allocation is provided to predefined people at a predetermined price. The Company's capital is raised through a preferential issue of shares. The procedure of issuing shares on a preferential basis takes time and effort.

For Indian Entrepreneur

For Foreign Entrepreneur

Special Entities

Tax Registrations

Other Registration

Returns

Annual Filings

Change Services

Closure

Legal Drafting

Special

Trademark

Copyright

Patent

Designing & Marketing

Blog

A complete guide to Preferential Allotment of Shares

Hi, Welcome to EbizFiling!

HOME

POLICY

RELATED LINKS

CONNECT WITH US

TOP 3 READS

Annual Compliance Calendar of LLP 2025-26

Role of IEC in International Trade: Future Trends

LLC vs INC : Difference between LLC and INC

Secure Payment Modes

Company Registration in Ontario, Canada
FSSAI Licence Modification
FSSAI License Renewal
Private Limited Company
US payroll services in India
UK Business Outsourcing Process in India
File CRF Form to change Master Data on MCA
Reply to Notice Under Section 148 of Income Tax Act
Reply to Notice u/s 143(2) of Income Tax Act for Scrutiny Assessment
Reply to Intimation Notice under section 245 of Incone Tax Act
Reply to Defective Notice u/s 139(9) of Income Tax Act
Reply to Income Tax Notice u/s 143(1)(A) for Prima Facie Adjustment
Reply to intimation notice of Section 143(1) of Income Tax Act
Reply to Income Tax Notice Under Section 133(6)
Corporate Legal Advice
LEI Code Registration
Employee Background Verification
US Business Solutions and Outsourcing Services in India
LLC Annual Compliances in Wyoming, USA
LLC Annual Compliances in Florida, USA
E-RCMC Registration under EPCES in India
Annual Filing & Bookkeeping & Accounting Service for Partnership Firm
ITIN Registration in the USA
Offshore Staffing Services in India
SEO Services in India
Content Writing Services in India
File Form 10BD Online under Income Tax Act
Annual Filing For Trust in India
Register a company in India from UK
Register a company in India from Germany
Register a company in India from France
Register a company in India from US
LLC Annual Compliances in Delaware, USA
Register a company in India from Canada
Register a company in India from UAE
Register a company in India from Singapore
Register a company in India from Australia
Company Registration in Indiana
Company Registration in California
Company Registration in New Mexico
Company Registration in New York
Company Registration in Texas
Company Registration in Wyoming, USA
Register Company in Florida, USA
Company Registration in Delaware
Annual Filing & Book-keeping & Accounting Service for Proprietorship Firm
Wall Designing
Virtual Office in India
Form 15CA Online Filing – Income Tax
NGO Darpan Registration
Overseas Direct Investment (ODI) through Automatic and Approval Route
HR Hiring and Recruitment Services in India
FLA Return Filing Online to RBI in India
APEDA (RCMC) Registration in India
ROC Annual Compliance for Producer Company
ROC Annual filing for Section 8 Company
ROC Annual filing for Public Limited Company
FCRA Registration Online in India
File Form CSR 1 online
Appeal to CIT- File an Appeal to Commissioner to Income Tax
Reply to Scrutiny Assessment Notice u/s 143(3)
Reply to Income Tax Notice- Know How to Respond to IT Notices
Surrender IEC License Online in India
भारत में कंपनी पंजीकरण / रजिस्ट्रेशन
Drop-Shipping Business in India by Foreigners
OPC Registration in India by an NRI
Company Registration in India- Know how to open a Company in India
Creation of Charge
LLP Registration in India by an NRI
Company Registration in India by an NRI
Right Issue of shares / Right Offerings
Renewal of IEC License
Application for the Extension of Name Reservation
Digital Marketing Services
Company Annual Filings in XBRL filing mode in India
12AA & 12A Registration Process
Trademark Registration / Brand Registration in the USA
Trademark Registration / Brand Registration in UK
Trademark Registration / Brand Registration in Malaysia
Strike Off Company
Payment of TDS return on purchase of property (form 26QB)
Business Advisory Services
Limited Liability Partnership Registration in Mumbai
Limited Liability Partnership
File ROC Form DPT 3 Return of Deposits
Income Tax Returns Filing
ROC Annual Compliance for Pvt Ltd Company
MCA Companies Fresh Start Scheme
LLP Annual Return Filing
MCA LLP Settlement Scheme 2020 (LSS 2020)
DIR 3 E KYC
ISO Certification in India
Run your operations / company in India without any liabilities
Add A Director
Accounting and Compliance Services for Start ups, Small companies, LLP and OPC (Micro Retainership Services)
Foreign Direct Investment through Automatic and Direct Route
Company registration in Bangalore
Apply for FSSAI license or Food license in India
Dormant Company Status Application
Trademark Registration in India
Conversion From Registered Partnership To LLP
Conversion From Registered Partnership To Private Limited Company
Change in Registered Office of LLP
Company Registration in USA
Company Registration in Malaysia
Company Registration in UK
Logo Design Services
Conversion of Private Limited Company to OPC
Opening a Branch in India by a Foreign Company
Nidhi Company Annual Filing
One Person Company (OPC) Registration in Mumbai
IEC Registration in Mumbai
Trademark Registration in Mumbai
Private Limited Company registration in Mumbai
Form GSTR 1
Maharashtra Professional Tax
Premium Retainership Services in India
MicroFinance Company registration
Conversion of Section 8 Company to Private Limited Company
DPIIT Startup Recognition certificate
RBI Form FC-GPR
Charge Registration on property
RBI Form FC-TRS
EPF Registration
PAN Application
Digital Signature
IEC Registration
TAN Application
DIN Application
GST Registration
Nidhi Company
Producer Company
Hindu Undivided Family (HUF), HUF Deed
Sole Proprietorship Firm Registration
Public Limited Company
E-Commerce Business
One Person Company (OPC)
Partnership
Indian Subsidiary
Non Profit Organization
GST Returns
CMA Report Preparation
E-Form Commencement of business certificate(form-20a)
Private Limited Company Registration
Startup Advisory Services
One Person Company (OPC)
Private Limited Company Registration
Income tax section 80g(5) registration
Company Registration Process in India for Foreigner- Know How to Open a Company in India
Secretarial Compliance Services
Search Report ROC
Revival of Struck Off Company
Trademark Watch Services
One Person Company (OPC)
Limited Liability Partnership
GSTR 9C filing by CA- GST Annual Audit due date, GSTR 9C FAQs
Tax Consultancy Services
International Trademark Registration Under Madrid Protocol
Surrender of DIN
Trademark Registration Process
LLP Registration Procedure – copy
LLP Registration Procedure – copy
Online LLP Registration and Complete Procedure
Aadhaar Udyog Online Registration
New Form INC-22A
FIND GST RATE, HSN CODE & SAC CODE
Company Registration in India
Hire Purchase
Contract Manufacturing Agreement
Web Development Agreement
Sole Selling Agreement
Underwriting Agreement
Mortgage Deed
Agreement Appointing A Common Arbitrator
Deed of Wakf-Alal-Aulad
Specific Power of Attorney
Foreign Collaboration Agreement Drafting
Joint Venture Agreement
Non- Disclosure Agreement
Franchise Agreement
Agreement to Sell Business
Vendor’s Agreement
Exclusive Distributorship Agreement
Shareholders Agreement
Consumer Complaint Letter
Power of Attorney
Company Name Change
Appointment of Auditors
Removal/Resignation of Director
GST Cancellation
GST LUT Letter of Undertaking
Conversion from Private Limited Company to Limited Liability Partnership (LLP)
Business Plan Preparation (Project Report)
Book-Keeping & Accounting
Trademark Renewal
Trademark Opposition
Trademark Rectification
Trademark Withdrawal in India
Payroll Setup & Processing
ESI Returns
PF Returns
TDS Returns Revision
Removal of Charge
Modification of Charge
MOA/AOA Printing
MOA/AOA Amendment
IEC Modification
Change of Registered Office Address
OPC to Private Limited Company
Conversion of Sole Proprietorship to OPC
Sole Proprietorship to Partnership firm
Conversion from Proprietorship to LLP
Conversion of Proprietorship to Private Limited Company
Conversion of Public Limited Company to Private Limited Company
Private Limited Company to Public Limited
Conversion of Partnership to Private Limited Company
Conversion of LLP to Private Limited Company
Conversion of Partnership to LLP (Limited Liability partnership)
Del Credere Agreement
Lease deed
TDS Returns
Strike Off OPC
Dissolution of Firms
Strike Off LLP
ESIC Registration
GST Modification
OPC Annual Filing
SSI/MSME/Udyog Aadhar Registration
Share Transfer & Transmission
Change in DIN
Add/Remove a Partner in LLP
LLP Name Change
Change in LLP Agreement
Increase in Authorized Capital
Change in Directorship
Patent Registration
Patent Search
Provisional Patent
Copyright Application
Trademark Assignment
Trademark Objections
Trademark Registration
Trademark Registration – copy
Limited Liability Partnership
Conversion into LLP