APPLICABLE SECTIONS AND RULES
In order to understand the concept of Private Placement better we have to look into applicable Sections and Rules which governs the said concept.
♦ Applicable Section: Section 42 of the Companies Act, 2013
♦ Applicable Rule: Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014
“Private Placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application subject to certain conditions.
Select Group of Persons
Employees’ Stock Option
As per section 2 (37) of Companies Act, 2013 it means the option given to the Directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such Directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price.
Qualified Institutional Buyers
“An institutional investor that possesses the necessary expertise plus the financial background to carefully evaluate and strategically invest in capital markets.”
It includes SEBI registered Mutual Funds, Venture Capital Funds, Alternative Investment Fund, Schedule Commercial Banks etc.
(b) demand draft or
(c) other banking channel
The provisions of sub-rule (2) shall not be applicable to –
if they are complying with regulations made by the Reserve Bank of India or the National Housing Bank in respect of offer or invitation to be issued on private placement basis:
Provided that such companies shall comply with sub-rule (2) in case RBI or NHB have not specified similar regulations.
PRIVATE PLACEMENT PROCEDURE
|1.||If Company defaults in filing PAS-3 within fifteen days of allotment,
> its promoters and
Shall be liable to a penalty for each default.
|One thousand rupees for each day during which such default continues but not exceeding twenty-five lakh rupees|
|2.||If Company makes an offer or accepts monies in contravention of this section,
>Its Promoters and
would be liable to pay a penalty that which may extend to
|the amount raised through the offer
Rs. 2 Crore, whichever is lower
Company refunds all the collected amount along with interest of 12 % p.a to the subscribers within thirty days of the penalty order.
|3.||Notwithstanding anything contained in section 42(9) and 42(10), any private placement issue not made in compliance of the provisions of 42(2)||shall be deemed to be a public offer and all the provisions of
> Securities and Exchange Board of India Act, 1992 shall be applicable.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and information available at the time of preparation of this document. Utmost care has been taken to ensure the accuracy, completeness, and reliability of the information provided,
In no event the author shall be responsible for any direct or indirect, special or incidental damage resulting from or arising out of or in connection with the use of the information provided in the article.