Common questions about share allotment contracts

1. Why do founders put a share allotment contract in place?

An allotment contract sets out what an investor receives and what they pay for newly issued shares in a private company. It is an enforceable promise, so both sides know exactly which terms they have committed to before money moves.

2. Who normally drafts the allotment contract?

Drafting usually sits with the business raising the round, working alongside counsel who checks the wording against local company law.

3. Which clauses belong inside an allotment contract?

Most contracts cover the price and number of shares on offer, the promises each party makes about its own position, anything that must happen before completion, the mechanics of closing, and a short block of general provisions.

4. How is an allotment contract different from a shareholders deed?

An allotment contract governs one transaction: the issue of shares on agreed terms. A shareholders deed keeps working long after that, describing how the owners vote, exit and behave toward one another.

5. Is an allotment contract enforceable in court?

Yes. Once signed by the issuing company and each subscriber it is a binding agreement, and either side can rely on it.