Private placement as defined under Explanation II to sub-section (1) of section 42 of the Companies Act 2013, means any offer of securities or invitation to subscribe securities to a select group of persons by a company other than by way of public offer through issue of a private placement offer letter and which satisfies the conditions specified in this section. The offer or invitation to subscribe securities should be given to select.
Important Points to be Noted related to Private Placement Under Companies Act,2013:
- Such Offer of securities or invitation to subscribe securities shall not exceed 200 in the aggregate in a financial year (excluding QIB and Employee under ESOP).
- In case more then 200 (separate for each kind of security) is offered irrespective of any receipt of payment that shall be treated as public offer. (Not applicable to NBFC and Housing Finance Company only if complying with their relevant Rules).
- Under Section 179(3) Company has to hold meeting of Board for issuing such shares, to such group of persons and it will be identified by the Board in the Board Meeting.
- Private Companies are exempted from to file such resolution in MGT-14 due to exemption notification dated 5th June, 2015.
- Company has to file e-form MGT-14 within 30 days of passing of Special Resolution.
- Company can’t use Subscription money unless return of allotment has been filed in PAS-3 with the ROC.
- Such shares don’t carry the Right to Renunciation.
- The money received will be kept in separate bank account and will be only used for the allotment of such shares.
- No cash tractions allowed.
- No fresh offer or invitation will be made unless allotment with respect to any offer or invitation made has been completed.
- The offer letter shall be send to the persons either in writing or electronic within 30 days of recording name of such person.
- The prices of the securities need to be justified and registered valuer is appointed for this purpose.
- Allotment has to carry within 60days of receiving the money.
- Then till 75th day payment to be return, if not return interest of 12% p.a.
Procedure for Private Placement:
1. Call of Board Meeting of Board of Directors:
- Notice of Board Meeting to be issued to all the Directors at least 7 days before the Board Meeting.
- Agenda of Meeting to be attached with the notice.
2. Hold the Board Meeting:
- Indentify the required persons to make offer to and prepare list of the same.
- Prepare Private Placement offer cum Application.
- Passing of Resolution for approval of the offer.
- Issue of General Meeting Notice to all shareholders at least 21 days before the meeting.
3. Hold Extra General Meeting:
- Present offer letter in PAS-4 before the shareholders in the Meeting.
- Pass Special Resolution for the Private Placement of the shares.
4. Circulate Offer letter /Application:
- Offer letter accompanied with serial order and address of the shareholders (can be send in writing or electronically).
- Issue offer letter within 30 days of general meeting.
5. Filling of form with the Registrar:
- Filing of MGT-14 within 30 days of passing of special Resolution with the Registrar of Companies.
6. Open Separate Bank Account:
- Payment for such Subscriptions to be made.
7. Filling form with the Registrar:
- File PAS-4 and PAS-5 within 30days of Circulation of the offer.
8. Calling of Board Meeting after receiving the Allotment Money:
- Presentation of list of Allottes before the Board.
- Passing of Board Resolution for Allotment of Shares (Within 60 Days of receiving the allotment money)
- Passing of resolution for issue of Share Certificates to the Shareholders.
9. File Form with ROC:
- File PAS-3 with the Registrar of Companies.
10. Issue of Share Certificate in Form SH-1 (As per Section 56 within 2 Months from the date of Allotment of shares.
In case of Non-Compliance
|Notice for Board Meeting
||7 days before
|Notice for EGM
||21 days before
||30 days of passing Special Resolution
|Issuance of Offer Letter
||30 days of record of name of persons
|PAS-4 to ROC in GLN 2
||30 days of issue of offer letter
|PAS-5 to ROC in GLN 2
||30 days of issue of offer letter
||Within 60 days from receipt of money
|Refund Application Money
||Within 75th day of Receipt of Money
|PAS-3 to ROC
||30 days from Allotment