Section 42 of the Companies Act, 2013 (‘CA 2013’) relating to private placement norms for issue of securities, was substituted by the Companies (Amendment) Act, 2017 w.e.f. 07.08.2018. Simultaneously, Companies (Prospectus and Allotment of Securities) Rules, 2014 was amended by the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 w.e.f. 07.08.2018.  The amendments have been made by the Ministry keeping in mind the suggestions of the Companies Law Committee.

Before the Companies (Amendment) Act, 2017 w.e.f. 07.08.2018, Section 42(7) of the CA, 2013 was as under

“All offers covered under this section shall be made only to such persons whose names are recorded by the company prior to the invitation to subscribe, and that such persons, shall receive the offer by name, and that a complete record of such offers shall be kept by the company in such manner as may be prescribed and complete information about such offer shall be filed with the Registrar within a period of thirty days of circulation of relevant private placement offer letter.”

Also, before the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 w.e.f. 07.08.2018, Rule 14(3) was as under

“The company shall maintain a complete record of private placement offer letter in Form PAS-5.

Provided that a copy of such record along with the private placement offer letter in Form PAS-4 shall be filed with the Registrar with fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and where the company is listed, with the Securities and Exchange Board within a period of thirty days of circulation of the private placement offer letter.

Explanation- for the purpose of this rule, it is hereby clarified that the date of private placement offer letter shall be deemed to be the date of circulation of private placement offer letter.

After the Companies (Amendment) Act, 2017 w.e.f. 07.08.2018, Section 42 and Rule 14 have been completely substituted and there is no provision of filing of offer letter in Form PAS-4 and record of persons to whom the offer letter is issued in Form PAS-5 with ROC. Accordingly, offer letter in Form PAS-4 and record of persons to whom the offer letter is issued in Form PAS-5 are required to be maintained by the Company and are no longer required to be filed with the ROC. The requirement of filing of the Offer Letter with the Securities and Exchange Board of India by listed issuers has also been dispensed with.

Before the amendment in Rules, a company was required to file the private placement offer letter in Form PAS-4 and record of persons to whom the offer letter is issued in Form PAS-5 in Form GNL-2 with the ROC. The amendment has removed the requirement of filing Form GNL-2 with the ROC, though the company is still required to maintain records in Form PAS-4 and Form PAS-5.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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