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Checklist of PREFERENTIAL ALLOTMENT of Securities to Persons other than Existing Equity Share Holders

Section 62(1)(c) &  Section 42* of Companies Act, 2013 read with Rule 14* of Companies (Prospectus and  Allotment of Securities) Rule, 2014 &  Rule 13 of Companies (Share Capital and Debentures) Rule,2014

Issue to be authorized by Articles of Association of the Company .
Prepare a list of persons (not exceeding 200 in a financial year for each kind of security) to whom offer may be made.

While counting 200, QIB & ESOP are excluded.

Only fully paid securities to be issued.
Ensure that no allotment is made against any previous offer/ invitation of any kind of security is pending
Determination of Issue Price on the basis of valuation Report of Registered valuer / Independent merchant banker/ independent CA having experience of ten years

The issue price shall not be less than the price determined on the basis of valuation report.

Where convertible securities are offered, price of resultant shares shall be determined before and on basis of valuation Report
Pass Board Resolution (BR)  for Issue of Securities & Approving the Notice of General Meeting.

The Explanatory Statement attached to the Notice of General Meeting shall contain the contents specified in Rule 14 of companies(Prospectus and  Allotment of Securities)Rule,2014 and  Rule13 Companies(Share Capital and Debentures)Rule,2014.

Pass Special Resolution(SR) at General Meeting for such issue which shall be valid for 12 months and allotment shall be completed within 12 months from the date of passing SR otherwise fresh SR will be required.
File Form MGT-14** with the Registrar of Companies within 30 days of passing Resolution.
Issue an Private Placement offer cum application form in Form No.PAS-4.

Note: No Form PAS-4 can be issued by company until  Form MGT-14 for SR or BR has been filed by the company.

Amount against offer to be received only by cheque / demand draft / other banking channels but not by cash – only from the bank account of the subscriber.

In case of joint holders, payment was received from first applicant only.

Share application money received is to be kept in separate bank account and will be utilized only for

(a) adjustment against allotment; or

(b) repayment to subscribers, if no allotment is made.

Company shall maintain a complete record of private placement offers in Form PAS-5.
Return of allotment of securities to be filed with the Registrar of Companies in Form No. PAS-3 within 15 days of Allotment of Securities.
The Money received for private Placement shall not be utilized by the Company unless the Company has filed Return of Allotment in Form PAS 3.
Share certificates to be issued within 2 months of allotment of shares / 6 months of allotment of debentures
Board resolution to specifically contain authority for issuance of share certificates to 2 directors and CS / one authorized person. One of the two directors should be director other than MD / WTD.
Entry in Register of Members in Form MGT-1.
Where the preferential offer of shares is made for a non-cash consideration, such non-cash consideration shall be treated in the following manner in the books of account of the company-

(i) where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or

(ii) where clause (i) is not applicable, it shall be expensed as provided in the accounting standards.

Documents Required:
BR approving issue of Securities
SR approving issue of Securities
Explanatory Statement to be annexed with the Notice of EGM
BR approving allotment of securities
Bank Statement of Account in which subscription money is received of Company
Valuation Report
PAS-4( Private placement offer cum application for subscription)
List of allottees
Details of Secured & unsecured loans for the purpose of Filling Form PAS-3
*Section 42 & Rule 14 of the Companies (Prospectus and  Allotment of Securities) Rule, 2014 has been amended w.e.f. 31.07.2018. Also the Form PAS-4 has also been revised. Please refer the latest form.**In case of Public Company,  MGT-14  will be filed for both SR & BR.

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June 2024