Issue of Shares explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A company can issue shares against property, intellectual property or services instead of money, but only through a special resolution and a price fixed on a registered valuer's report. The return of allotment must then carry the contract and the valuation. This guide follows the law step by step, as per the Companies Act, 2013 in the Ministry's consolidated text (last updated 29 July 2022) and the Rules as consolidated in the Ministry's e-book, consulted on 3 October 2026. Later amendments should be checked before you act.
Section 62(1)(c) allows shares to be issued "either for cash or for a consideration other than cash" to any persons, if a special resolution authorises it and the price is determined by the valuation report of a registered valuer. The rules add disclosures in the explanatory statement, a twelve-month window for the allotment and, in the return of allotment, a stamped copy of the contract and the valuer's report. Where a director or a connected person is on the other side, section 192 adds a general meeting approval.
Where the power comes from
Section 62(1)(c) of the Act lets a company with share capital offer further shares to any persons, whether or not they are existing members or employees, if it is authorised by a special resolution. The text says this may be "either for cash or for a consideration other than cash", provided the price is determined by the valuation report of a registered valuer, subject to the applicable provisions of Chapter III and other prescribed conditions.
Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 deals with issues on a preferential basis under this clause. It says the issue must also comply with section 42. If you want to see how a private placement runs end to end, read our step-by-step private placement guide.
For the allotment itself and the filing that follows, our PAS-3 allotment guide covers the mechanics. If you want the legal team to prepare the resolutions, the valuation brief and the return, see our allotment of shares and PAS-3 service.
Step 1: valuation by a registered valuer
Section 247(1) says that where a valuation of property, stocks, shares, securities, goodwill or other assets is required under the Act, it is done by a person registered as a valuer, appointed by the audit committee or, if there is none, by the Board. Section 247(2) requires an impartial, true and fair valuation with due diligence, and bars a valuer from valuing assets in which he has a direct or indirect interest.
Rule 13(2)(i) says that where shares are allotted for consideration other than cash, the valuation of that consideration is done by a registered valuer, who submits a report to the company giving justification for the valuation. Rule 13(2)(g) says the price of the shares, whether for cash or otherwise, is determined on a registered valuer's report. Two valuations may therefore be needed in practice: one for the asset taken and one for the price of the shares given. Read the rule against your facts.
Step 2: special resolution and explanatory statement
Rule 13(2) applies to an unlisted company's preferential offer. It requires that:
- the issue is authorised by the articles;
- the members pass a special resolution;
- the explanatory statement to the notice under section 102 discloses the items in sub-rule (2)(d), including the objects of the issue, the number of shares, the price, the basis on which the price was arrived at "along with report of the registered valuer", the proposed allottees and the percentage they will hold after the issue.
Item (xii) is the one that matters here: "the justification for the allotment proposed to be made for consideration other than cash together with valuation report of the registered valuer."
Rule 14(1) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 separately requires a prior special resolution for each private placement offer. Its explanatory statement must name the "valuer who performed valuation" and give the basis or justification for the price.
Private companies have exemptions from some provisions by notification under section 462; check whether one applies.
Step 3: allot within the window
Rule 13(2)(e) and (f) say the allotment must be completed within twelve months from the date of the special resolution. If it is not, another special resolution is needed to complete the allotment later.
Rule 14(5) says the subscriber must pay from his own bank account, but its second proviso says that condition does not apply "in case of issue of shares for consideration other than cash". The company still has to follow the rest of section 42.
Step 4: books and the return of allotment
Rule 13(2)(j) tells the company how to carry a non-cash consideration in its books. If it is a depreciable or amortizable asset, it is carried to the balance sheet in accordance with the accounting standards. If that does not apply, it is expensed as the accounting standards provide. Your auditor will guide the entry.
For the return, section 39(4) requires a return of allotment with the Registrar in the manner prescribed. Rule 12 of the Prospectus and Allotment Rules sets the content:
| Item | What the rule says | Source |
|---|---|---|
| Form and time | Form PAS-3 within thirty days of the allotment | Rule 12(1) |
| List of allottees | Names, address, occupation if any, securities allotted, certified complete and correct | Rule 12(2) |
| Contract | A copy, duly stamped, of the contract under which securities were allotted, with any contract of sale for a property or asset, or for services | Rule 12(3) |
| Contract not in writing | Complete particulars, stamped as if it had been written; the Registrar may require adjudication under section 31 of the Indian Stamp Act, 1899 | Rule 12(4) |
| Valuation | A registered valuer's report on the consideration, attached with the contract | Rule 12(5) |
| Section 62(1)(c) issues | For a company other than a listed company, the valuer's report is attached to PAS-3 | Rule 12(7) |
| Private placement | Rule 14(6): return within fifteen days of allotment, with the list of allottees including particulars of consideration received if non-cash | Rule 14(6) |
Rule 12(3) excludes bonus shares from the contract requirement. For stamp duty on the issue and the contract, see our guide on stamp duty on shares; state laws fix many rates, so check the State.
Examples of what is issued against
- Property: a company takes a building from a promoter. The registered valuer values the building; the sale contract and the valuation go with PAS-3.
- Intellectual property: a company takes a software code base from its developer. The valuer reports on the asset and justifies the value.
- Services: shares for know-how or services are different. Section 54 allows sweat equity shares to directors or employees, with a special resolution that specifies the number of shares, the current market price, the consideration and the class of recipients. Rule 8 requires the shares to be valued by a registered valuer, and intellectual property rights or know-how to be valued by a registered valuer with a report to the Board. See our sweat equity guide.
Worked example (invented figures)
Alpha Tech Private Limited buys a patent from Meera Rao. A registered valuer values the patent at Rs 40,00,000. The valuer's report on the issue price is Rs 40 per share of face value Rs 10. Shares to be allotted: 40,00,000 / 40 = 1,00,000 shares. The special resolution is passed on a date; the allotment must be completed within twelve months of it. PAS-3 carries the stamped assignment contract, the valuer's report and the list of allottees. If Meera Rao were also a director, section 192 would first need a general meeting approval.
When a director is on the other side
Section 192(1) bars a company from entering into an arrangement under which a director of the company, its holding, subsidiary or associate company, or a connected person, acquires assets from the company, or the company acquires assets from them, for consideration other than cash, unless a general meeting has approved it beforehand. Section 192(2) says the notice must give the particulars and the value of the assets "duly calculated by a registered valuer". Under section 192(3), an arrangement in breach is voidable at the company's instance, with two exceptions printed in the text.
Common mistakes
- Allotting first and getting the valuation afterwards.
- Attaching a valuation of the asset but not the report that supports the share price.
- Filing PAS-3 without the stamped contract.
- Treating services and sweat equity as the same thing; section 54 has its own conditions.
- Letting twelve months pass after the resolution without a fresh special resolution.
Need help with an allotment against an asset?
If you are issuing shares against property or know-how, we can coordinate the valuer's brief, the resolutions, the stamped contract and the return of allotment through our allotment of shares and PAS-3 service.
Key takeaways
- Section 62(1)(c) permits issue for cash or other than cash, on a special resolution and a registered valuer's price.
- Rule 13 sets the explanatory statement items and a twelve-month window for allotment.
- PAS-3 carries a stamped contract and the valuer's report for non-cash allotments.
- Directors and connected persons trigger section 192 as well.
- Bonus shares are outside the contract requirement in rule 12(3).
Read next
- Is a Valuation Report Needed When Shares Are Transferred
- Private Placement of Shares Step by Step
- Converting a Loan Into Equity Shares Under Section 62(3)
- Section 192: Non-Cash Transactions With Directors
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.