What is the Difference Between Allotment and Issue of Shares?

The difference between allotment and issue of shares lies in their definitions and the chronology of their occurrence in the process of offering and distributing shares to potential investors.

• Allotment of Shares: Allotment refers to the process of assigning and allocating authorized shares of stock to investors, typically occurring after shares have been subscribed or applied for. It is based on the applications received from investors during a subscription period and follows the receipt of these applications. Share allotment can be used for various purposes, such as establishing strategic partnerships, enhancing liquidity, and reducing the risk associated with concentrated ownership.
• Issue of Shares: The issue of shares is the act of offering and distributing shares to potential investors, encompassing the broader process of offering shares for sale or subscription. It involves transferring the ownership of the shares to shareholders.

While the terms 'allotment' and 'issue' are sometimes used interchangeably, they have distinct meanings in the context of shares. In general, allotment is a method of share distribution in a company, whereas the issue of shares is the offering of the ownership of the shares to shareholders. Although there may be subtle differences between issuing shares and allotting them, the processes often amount to the same thing in most circumstances.

Comparative Table: Allotment vs Issue of Shares

The difference between allotment and issue of shares can be summarized in the following table:

In summary, allotment of shares is the formal process through which a corporation assigns and apportions its authorized units of ownership, represented by shares of stock, to individuals, institutions, or entities. On the other hand, the issue of shares is the act of offering and distributing shares to potential investors, which involves offering the ownership of shares to shareholders.