Letter of Allotment

Letter of Allotment

It refers to a letter that intimates the share applicants the fact that they have been allotted shares. It is a letter that tells someone who has applied for shares in a new company how many shares he or she has been allotted. It is a document that details and confirms the amount or number of securities allotted to an applicant for a new issue or a rights issue. Generally, while you will be pursuing a bank loan to buy a certain property, the builder/housing society issues the allotment letter to the buyer which includes details pertaining to the description of the property being sold/bought by the two parties.

Letter of Allotment is a letter from a company to a person who has asked to buy shares in that company, telling them how many shares they have been given and if they owe any more money. It is a letter telling someone how many shares they have been given when new shares are being made available to buy. This letter is used also in real estate. When an individual buys property under construction he/she has to receive an allotment letter from the builder. In that case, the allotment letter includes details regarding the property, payment options, charges, etc. It is necessary in order to obtain a loan from the bank.

Letter of Allotment is a method by which investors aka subscribers can distribute their securities. Securities or bonds stand for financial instruments, which can be used by investors to raise the capital. When the subscription period comes to its end, the demand for a new issue can surpass the number of shares or bonds which are being issued. In this case, the proper bank can allot all the bonds in two ways: either on the basis of the formula or by lottery. What is important, the letter of allotment can be renounced or even sold. The allotment letter is a title to the rights on the stock.

Preparation of allotment letter –

  • the name of the company followed
  • form of the given company
  • the amount of authorized capital
  • the address of the registered office
  • the registration number of the company
  • the amount and conditions of increase of capital
  • if needed, the amount of to be subscribed for shares
  • the name of the company, which is receiving the funds
  • full name of the subscriber
  • indication of the proper bank
  • mention of the notary responsible for the bonds
  • mention of giving a copy of the letter to the subscriber.