Private Placement of Securities Under Companies Act
1. Only to Identified Persons
Private Place made only to identified person, Maximum no of identified Persons not more than 50 or such number of persons as may be prescribed i.e 200 as per Rule 14(2).
Identified person excludes the QIB and employee of the Company being offered securities under a scheme of Employee Stock option according to section 62(1)(c).
These restriction would be calculated of each kind of securities i.e Equity shares, preference shares, or debentures.
2. Conditions under Rule 14
A Board resolution required to be passed for approving the notice for calling General Meeting for passing SR for the purpose of Private placement.
Special Resolution Rule (1)
A special resolution is required to be passed before making any offer by the company under section 42 to subscribe securities through Private Placement.
Explanatory Statements Rule (1)
Explanatory statement attached to the notice of the general meeting shall disclose the followings-
a. Particulars of the offer;
b. Date of Passing Board Resolution;
c. Kind of the securities offer;
e. Name and address of the valuer, who will undertake valuation;
f. Amount which the company intends to raise by way of such securities;
g. material terms for raising such securities;
h. Contribution made by the promoters or director.
Non Applicability of the Rule 14(1)
This sub-rule shall not applicable in case of offer or invitation for non-convertible debentures, where amount to be raised through such offer or invitation not exceed the limit specify under section 180 i.e where the money to be borrowed, together the money already borrowed by the company will exceeds aggregate of its paid-up share capital and free reserves. Only Board resolution shall be adequate.
In case the Limits exceeds the section 180(1)(c)
In such a case it shall be sufficient if the company passes a previous special resolution only once in a year for all for all offer or invitations for such debentures during the year.
Offer Letter Rule 14(3)
Private Placement offer letter shall be Form PAS-4 and shall be addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in e-mail.
Any person other than the person whose name mentioned in offer letter shall apply through such application or applicant not fulfilling such conditions shall be invalid.
Register of Private placement Rule 14(4)
Company shall maintain a complete record of private placement offer in Form PAS-5
Payment through Bank Account Rule 14(5)
The payment to be made for subscription of the securities to the person subscribing to such.
This is not applicable in case of subscription of the securities other than cash.
Non- Applicability of Rule 14(2) Rule 14(7)
1. NBFC registered with RBI;
2. Housing Finance Company registered with National Housing Bank
A copy of BR or SR shall be filed with the Registrar, once the resolution has been filed with the registrar then after that company shall issued private placement offer cum application letter.
3. No fresh Invitation Section 42(5)
Unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company, No fresh offer or invitation under under this section shall be.
4. Allotment of securities
Allotment shall be made within 60 days from the receipt of the application money for such securities.
IF Company is not able to allot the securities within that period, it shall repay the application money within 15 days from the expiry days and if the company fails to repay the application money with the aforesaid period;
It shall be liable to repay that money with interest at rate 12% pa from the expiry of 16th days.
5. Advertisement Section 42(7)
Company shall release any public advertisement; or in any media to inform about the issue to public at large
6. Return of Allotment Section 42(8) & Rule 14(8)
Return of allotment us 42 of the companies act shall be filed within 15 days from the date of the allotment.
Return of allotment shall be in form PAS-3.
A List of allottees shall be attached with form PAS-3.
Particulars of list of allottes:
1. Name and address of the list of allottees.
3. E-Mail ID;
4. Class of the security held;
5. date of allotment of security;
6. No. of securities held and particulars of securities held in consideration other than cash.
7. Section 42 (9)
If company make default in contravention of provision of section 42 then; the company, its promoters and directors shall be liable to a penalty for each default of Rs. 1000 for each day during which such default continues but not exceeding 25,00,000 rupees.
8. Section 42 (10)
If Company makes offer in contravention of the provision of this section then the company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or 2 cr rupees, whichever is lower, and the company shall also refund all monies with interest as specified in sub-section (6) to subscribers within a period of thirty days of the order imposing the penalty.