By Master James 
When it comes to company shares, understanding share allotment and share transfer is essential. These terms sound similar but are quite different. In this blog, we’ll break them down and explain their key differences in simple terms.
What Is Share Allotment?
Definition
Share allotment is the process where a company issues new shares. These shares are distributed to individuals or organizations. This happens to raise funds or bring new investors into the company.
Key Features
- New shares are created.
- It increases the company’s share capital.
- Often done during business expansion or funding rounds.
Types of Share Allotment
- Rights Issue: Existing shareholders get the first chance to buy new shares.
- Bonus Issue: Shares are given for free, usually as a reward to shareholders.
- Private Placement: Shares are allotted to select investors or institutions.
The Process
- The board of directors approves the allotment.
- Applications are invited from interested parties.
- Shares are allotted, and records are updated.
What Is Share Transfer?
Definition
Share transfer is when an existing shareholder sells or transfers their shares to someone else. This doesn’t involve creating new shares.
Key Features
- Ownership of shares changes hands.
- It doesn’t increase the company’s share capital.
- Often used during business deals or inheritance.
Types of Share Transfers
- Voluntary Transfers: Shares are sold or gifted.
- Involuntary Transfers: Happens due to legal orders, such as in a divorce or inheritance.
The Process
- A transfer deed is signed by both parties.
- Stamp duty is paid.
- The transfer is registered in the company’s records.
Key Differences Between Share Allotment and Share Transfer
| Aspect | Share Allotment | Share Transfer |
| Purpose | To raise capital. | To transfer ownership. |
| Effect on Capital | Increases share capital. | No impact on share capital. |
| Parties Involved | Company and investors. | Seller and buyer. |
| Creation of Shares | New shares are issued. | No new shares are created. |
When to Choose Share Allotment
For Startups
New businesses use share allotment to raise initial funding.
For Growth
Established companies allot shares to expand or invest in new projects.
When to Choose Share Transfer
For Existing Investors
Investors who want to sell their shares opt for share transfer.
For Succession
Share transfer is ideal for passing shares to heirs or family members.
Final Thoughts
Both share allotment and share transfer play vital roles in business operations. Share allotment helps companies grow by raising funds. Share transfer allows smooth ownership changes. Understanding the differences ensures that businesses and investors make informed decisions.
If you’re unsure which one suits your needs, consult a financial or legal expert for guidance.