Cross Border Non Cash Capital Contribution Registration Requirements
Cross-border non-cash capital contributions require certified statutory appraisals, full title assignments, and customs verification before corporate registration.
Share Allotment
Meaning
Process by which a company creates new shares and assigns them to specific individuals or entities in exchange for capital or services. A share allotment increases the total issued share capital of the company and dilutes the ownership percentage of existing shareholders. This action requires a resolution from the board of directors and often the approval of the existing shareholders.
The procedure is a fundamental step in any fundraising or equity incentive program.
Legal Authority
Directors must have the power to issue shares under the articles of association or through a specific shareholder vote. The share allotment process involves the issuance of a letter of allotment followed by the entry of the name in the register of members. Statutory filings must be made with the corporate registry within a set timeframe to notify the public of the new capital.
Failure to follow these steps can make the issuance void.
Price and Consideration
Shares can be issued for cash, property, intellectual property or the performance of services. The board must determine the fair value of the consideration to ensure that the share allotment does not unfairly disadvantage the company. If the company is private, a formal valuation is usually required to set the price per share.
Shares cannot be issued at a discount to their nominal or par value in many jurisdictions.
Dilution Control
Preemption rights give existing shareholders the first opportunity to buy a proportional amount of the new issue. A share allotment that bypasses these rights usually requires a formal waiver from the current owners. This protection prevents the management from diluting a shareholder’s influence without their consent.
The terms of these rights are found in the shareholders agreement.
Grounding Share Class Structures in Statutory Member Registers
Legal title to specialized share classes depends on formal entry in the statutory member register rather than unrecorded shareholders agreement terms.