This Article provides procedural requirements associated with Private Placement of Securities which is governed by Section 42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
Private Placement plays a central role in helping businesses secure the funding they need while also offering exclusive investment opportunities to a select number of accredited investors.
Before undertaking a private placement, companies must fulfil certain requirements as per the Companies Act 2013. Some of the key requirements for unlisted companies include:
1. Finalize List of Allottees for Private Placement Offer of securities.
2. Send Notice of Board Meeting at least 7 days prior to Board Meeting to all the Board Members, KMPs and others concerned.
3. Hold Board Meeting and pass Board Resolutions for:
- Approval of List of Allottees.
- Opening of a Separate Bank Account.
- To fix, day, date, time and venue of General Meeting.
- Approve notice of General Meeting.
- Take note of Valuation Report of Registered Valuer.
4. File form MGT-14 within 30 days of passing of BR.
5. Send Notice of General Meeting to all concerned at least 21 days before General Meeting.
6. Hold General Meeting and pass Special Resolution (SR) for approval of Private Placement along with PAS-4.
7. File Form MGT-14 within 30 days of passing SR.
8. Dispatch PAS-4 to all prospective Investors.
Receive application money.
Hold Board Meeting and pass Board Resolution to allot securities and issue Share Certificates.
File form PAS-3 within 15 days of allotment of securities.
Some Important points:
- Marketing is not allowed in case of Private Placement.
- Private Placement Offer can be made only to 200 persons in a Financial Year. Offer to more than 200 people will be a Public Offer.
- Companies need to allot securities within 60 days of receipt of application money.
- In case of non-allotment, Company need to refund the application money within 15 days of expiry of above referred 60 days.
- I case the Company does not refund the application money within 15 days, then the Company will have to pay 12% (per annum) interest and same shall be treated as Deposits.
- Right of renunciation is not available.
- PAS-4 will be issued only after passing SR as new need to give details of Special Resolution in PAS-4.
- Payment by way of cash is not allowed.
- Valuation by registered Valuer is mandatory.
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