Well, like Harvey Specter says, “What are your choices when someone holds a gun to your head? You do what they say or they shoot you, right? Wrong! You take the gun. You pull out a bigger gun or you call their bluff or do one of a hundred and forty six other things.”
You must be thinking why am I quoting Suits when my heading clearly says about Section 42 of the Companies Act, 2013.
The answer to the abovementioned is simply that I wanted to engage you into reading this, however, the underlying answer is that, since all of us have been waiting patiently for this section to be enforced since its notification dated back in February, the government has finally answered our prayers and blessed us with the all new Section 42 (private placement) itself.
Now, the question arises again. Is it revamped altogether or just sugar coated?
I would say that yes, there are certain changes in this section and clarifactory changes altogether. The main changes are mentioned below:
Earlier, section 42, that is private placement offer was to be only to select group of persons not being more than 50 except in case of Qualified Institutional Investors and employees covered under Employee Stock Option Scheme. The new amendment, Rules 14 of Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 states that this number shall now stand increased from 50 to 200 in any financial year. A clarification exists in both the cases saying the calculation of such limit shall be done individually for each class of shares being Preferance, Equity and Debenture.
Previously, once the allotment of these securities was successfully carried out, a return of allotment in PAS 3 was to be filed by the company with the registrar within 30 days of such allotment which, with this amendment stands corrected at 15 days, putting the company in a rather delicate position due to considerable shortage of time.
As we all are aware by now that Private Placement covers all kinds of securities being Equity, Preferance and Debentures however, excluding Rights and Bonus Issues, the company should make sure the provision that is applicable to each class is used accurately to avoid any confusion.
Things which still continue to have an impact on this Section are as follows
Concluding this article, we can say that yes the government did try to clear up the air around it, however apart from some drastic changes like filing of return of allotment in 15 days, there is no major change in this amended act and rules.
Notifications Related to Section 42 of Companies Act, 2013 as amended by Companies (Amendment) Act, 2017-
|MCA notifies new provisions for Issue of shares on private placement basis||S.O. 3921(E)||07/08/2018|
|Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018||File No. I/ 2013-CL-V||07/08/2018|