Preferential allotment

Preferential allotment:

Preferential allotment of shares (convertible instruments or common shares) refers to the procedure of bulk allotment of fresh shares to a specific group of individuals, investors, companies, or any other outsider person. It is for to a pre-identified people, who may or may not be the existing shareholders of a firm.
What is the process? The company needs to pass a special resolution for preferential allotment. For the listed companies, preferential allotment is subject to to all the regulations such as the Takeover Code. Valuation from certified valuers has to be carried out. (Please note that you did not get confused between preferential allotment of shares and allotment of preference shares.)
When is preferential allotment done? Preferential allotment is done to the individuals who are interested in getting a material stake in the company. Preferential allotment is also a means of awarding specific individuals for their contribution in the progress of the company. The word preferential connotes a certain kind of preference when it comes to eligibility, selection, concession, discount and favourable terms. Among all the prescribed methods, the preferential allotment is considered to be the best fundraising option for unlisted companies.