How to issue shares by preferential allotment
It is not just a board resolution - here is the full, legally-required sequence.
Reviewed 4 June 20261 min read
Issuing new equity shares to an investor or new person in a private company is a preferential allotment under Section 62(1)(c), which must also satisfy the Section 42 private-placement rules. A single board resolution is not sufficient.
What is required
- A registered valuer report (IBBI-registered) to set the price - mandatory for unlisted companies (Section 62(1)(c) + Rule 13(2)(g)).
- A special resolution of shareholders at a general meeting (>= 75% of votes), valid 12 months.
- A separate bank account with a scheduled bank for the application money.
- Allotment within 60 days of receiving money.
Forms and deadlines
- MGT-14 for the special resolution (within 30 days).
- PAS-4 offer letter (only after MGT-14) and PAS-5 record.
- PAS-3 return of allotment within 15 days of allotment (for private placement) - note this is 15 days, not 30.
- Share certificates within 2 months of allotment.
Step by step
- 1Confirm the AoA allows it and authorised capital is sufficient (increase it first if not).
- 2Obtain a registered valuer report for the share price.
- 3Hold a board meeting; approve the issue, the offer letter and the separate bank account; call an EGM.
- 4File MGT-14 for the board resolution.
- 5Pass a special resolution at the EGM; file MGT-14 for it.
- 6Open a separate scheduled-bank account; send PAS-4 to identified persons; maintain PAS-5.
- 7Receive money; allot within 60 days at a second board meeting.
- 8Issue share certificates and file PAS-3 within 15 days of allotment.
Frequently asked questions
Can I issue shares with just a board resolution?+
No. A preferential allotment needs a registered valuer report and a shareholder special resolution, plus the Section 42 private-placement steps (separate bank account, PAS-4/PAS-5, PAS-3). A board resolution alone is legally deficient.
What is the PAS-3 deadline for a private placement?+
15 days from the date of allotment under Section 42(8). The 30-day figure that appears widely online applies to general allotments under Section 39, not private placement.