Legal Definitions - allotment certificate

An allotment certificate is a formal document issued by a company to an investor. It serves as a record confirming the essential details of an agreement where the investor has committed to purchase a specific number of new shares directly from the company. This certificate typically outlines key information such as the exact number of shares to be acquired, the agreed-upon price per share, and the schedule for payment and when the shares will be officially delivered or transferred to the investor.

Here are a few examples to illustrate how an allotment certificate works:

• Startup Funding Round: Imagine a new technology startup, "InnovateTech Inc.," is raising capital from early investors. An angel investor, Ms. Chen, agrees to invest $100,000 in exchange for 10,000 shares at $10 per share. InnovateTech Inc. would issue an allotment certificate to Ms. Chen. This document would formally state that she is entitled to 10,000 shares, the price is $10 per share, and specify the date by which she needs to make the payment and when the shares will be officially registered in her name. This certificate provides Ms. Chen with proof of her right to those shares under the agreed terms.

• Public Company Rights Issue: A publicly traded manufacturing company, "Global Industries PLC," decides to raise additional funds for a new factory by offering existing shareholders the opportunity to buy new shares at a discounted price (a "rights issue"). Mr. Davies, an existing shareholder, decides to exercise his rights to purchase 500 new shares at a special price of $25 per share. Global Industries PLC would then provide Mr. Davies with an allotment certificate. This certificate confirms his commitment to acquire those 500 shares, the specific discounted price, and the deadline for payment, as well as the date when these new shares will be credited to his brokerage account, formalizing his participation in the rights issue.

• Employee Share Purchase Plan: "MediCorp Inc.," a large pharmaceutical company, offers its employees a chance to buy company shares as part of an employee share purchase plan. Dr. Anya Sharma decides to participate, committing to purchase 200 shares through payroll deductions over the next six months at a fixed price of $75 per share. MediCorp Inc. would issue an allotment certificate to Dr. Sharma. This certificate details her commitment to buy 200 shares, the price of $75 per share, and outlines the payment schedule via deductions and the anticipated date when the shares will be fully purchased and transferred into her investment account. It serves as her official record of the agreement to acquire those shares.