Definition
A letter of allotment is a formal written notice issued by a company to an applicant or subscriber confirming that a specified number of shares have been allocated to that person following a share offering or subscription process. It identifies the number of shares allotted, the terms of allotment, and, where applicable, the schedule of payments due. The letter of allotment itself may function as a temporary document of title, allowing the recipient to deal in the allotted shares before a formal share certificate is issued.
In corporate and securities practice, the letter of allotment arises most commonly in the context of initial public offerings, rights issues, and private placements, where a company receives more applications than can be fully satisfied, or where shares are distributed according to a predetermined allocation scheme.
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Common Confusion
Letter of allotment is occasionally conflated with letter of application or letter of regret. These are distinct documents. A letter of application is the investor's request to subscribe for shares. A letter of allotment is the company's affirmative response confirming the allocation made. A letter of regret, by contrast, notifies an unsuccessful applicant that no shares have been allotted. In some corporate transactions, a letter of allotment and a provisional allotment letter (PAL) are also distinguished: the PAL is issued in rights issues and carries renounceable rights, whereas a letter of allotment in a public offering may or may not be renounceable depending on the offering's terms.
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Why It Matters in Research
The letter of allotment occupies a particular gap in older legal sources: it is a practical instrument of corporate administration that appears more prominently in commercial and company law treatises than in general legal dictionaries. Researchers working in nineteenth- and early twentieth-century corporate records will encounter letters of allotment as legally operative documents — they were the mechanism by which a subscriber's equitable interest in allotted shares was established, prior to entry on the share register and issuance of a formal certificate.
The timing of allotment matters for several legal purposes: allotment completes the contract of subscription, triggering the applicant's liability for unpaid amounts on the shares. Courts have treated the dispatch of the letter of allotment (not its receipt) as the moment of contract formation under postal acceptance rules, a point with direct relevance to disputes about whether a valid allotment occurred.
Researchers in U.S. contexts should note that the letter of allotment as a formal instrument of share distribution is more prevalent in English and Commonwealth company law. American securities practice developed parallel mechanisms through the prospectus and confirmation of allocation processes, but the terminology is less standardized. Sources using "letter of allotment" in a U.S. context before the mid-twentieth century may be drawing directly on English company law vocabulary.
The term "allotment" in a completely different legal context — the allotment of Native American tribal lands under the Dawes Act and related legislation — is unrelated to shares. Researchers should take care that archival or index searches do not conflate these two bodies of law. See the Encyclopedia cross-reference below for the property law dimension.
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Historical Dictionary Support
Bouvier's Law Dictionary defines a letter of allotment as a letter of advice to a shareholder or subscriber to shares in a registered company, acquainting him with the number of shares allotted and dates when payments are due, citing the Standard Dictionary. This definition is functional but lean. It captures the administrative character of the instrument accurately — it is a notice, not a contract in itself, though it completes the subscription contract — but Bouvier's does not address the document's status as temporary evidence of title or its renounceability, both of which were significant in English company law practice by the time the entry was written.
Historical legal dictionaries generally treat the letter of allotment as a term of art in company law rather than exploring its evidentiary or transactional dimensions. Researchers relying solely on Bouvier's will understand what the document is but will not find guidance on its legal effect at the moment of dispatch, its role in provisional allotment situations, or the distinction between a renounceable and non-renounceable letter. Treatises on company law and stock exchange practice from the same period provide substantially more detail.
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Jurisdictional Note
The letter of allotment is most fully developed as a legal instrument in English company law and the company law of Commonwealth jurisdictions. In the United States, the functional equivalent exists within securities offering procedures, but the specific term and its associated doctrines — particularly postal acceptance rules applied to allotment — are drawn primarily from English authorities. Researchers working across jurisdictions should not assume that U.S. and English sources use the term with identical legal content.
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Encyclopedia Cross-Reference
Indian Land Law — Tribal Trust Land, Allotment, and the Indian Reorganization Act (The Law Mind Property Law Encyclopedia) — relevant for the distinct legal meaning of "allotment" in federal Indian law, which concerns land distribution to individual tribal members and is entirely separate from the corporate shares context.
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