Preferential Allotment&Peadging

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CA.CS.V.Viswanathan

CA.CS.V.Viswanathan (Querist)
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28 April 2009 what is ment by Preferential Allotment of Shares? How to Do the Pricing for Pref alotment?
Pleading of Share what does that Indicate?
How can Promoteres Bring the money received by pleadging share into the company?

Sachidanand Singh

Sachidanand Singh (Expert)
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30 April 2009 Preferential allotment is making allotment of shares pursuant to S81(A)of the Companies Act. Under this section allotment of shares can be made to any select group of persons who may or may not be shareholders of the company. As this group is allotted shares in preference over all others, this allotment is called preferential allotment.

If the company is listed the minimum price at which the shares can be issued must not be lower than the higher of the following:

a) Average of weekly high and low for a period of six months prior to the appointed date

b) Average of the daily high & low of teh share prices for a period of two weeks before the appointed date

Appointed date is the date of the board meeting in which it was resolved to make preferential allotment of shares.

Please refer to SEBI (Disclosure & Investor Protection) Guidelines for fuller details on pricing of such shares.

Pledging of shares means giving an interest in shares' ownership to some person for taking loans. The pledges shares constitute security for the loan. Promoters can bring in the funds raised by pledging their shares by way of loan or even subordinate debts to the company.

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CA.CS.V.Viswanathan

CA.CS.V.Viswanathan (Querist)
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03 May 2009 Thank You

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