Private Placement means offer and issuance of shares to a select group of persons by a Company.
The Procedure for issuance of shares on Private Placement Basis is as follows:
1) Hold a Board Meeting: The first and the foremost step for issuing shares on a Private Placement Basis is to hold a Board Meeting for the following purposes:
a) Approving the list of persons to whom the shares shall be issued on a Private Placement basis.
b) To approve the offer letter for issuance of shares (Form PAS-4)
c) Calling an Extra-Ordinary General Meeting (“EGM”) for obtaining the consent of the shareholders for issuance of shares on Private Placement Basis.
2) Call an Extra-Ordinary General Meeting (“EGM”) to approve the resolution for the issuance of shares on a private placement basis as a special resolution and to approve the offer letter to be circulated for this purpose.
3) File the Form MGT-14 within 30 days of approval of the resolution by the shareholders of the Company.
a) Notice of EGM;
b) CTC of Special Resolution approving the issuance of shares on Private Placement Basis;
c) Valuation Report from a Registered Valuer.
4) Circulate the Offer Letter to the persons to whom the offer is to be made within 30 days of recording their names. It should further be noted that the offer letter should be circulated only after filing Form MGT-14.
5) Open a Separate Bank Account for receiving the share application money.
6) Receipt of Share Application Money.
7) Hold a Board Meeting for the allotment of shares to the persons from whom the application money has been received within 60 days of such receipt.
8) Entry in the register of members within 7 days of allotment of shares to the shareholders.
9) Filing of Form PAS-3 within 15 days of allotment of shares. It should further be noted that the share application money is utilized only after filing of Form PAS-3.
10) Issuance of Share Certificates within 2 months from the date of allotment
11) Payment of Stamp Duty on Share Certificates within 30 days of issuance of share certificates as per the Indian Stamp Act. The procedure for payment of stamp duty in Gurgaon, Haryana is given in the link below.
Note: A valuation report should be procured from a registered valuer for arriving at the price at which shares shall be issued on a Private Placement Basis. The value date shall be at least 30 days before the date of the General Meeting for approving the issuance of shares on a Private Placement Basis.
Author – CS Kartik Arora is a member of The Institute of Company Secretaries of India and can be contacted at [email protected]
Kind Attention: The information provided herein is for educational purposes only and the author assumes no responsibility or liability for any errors or omissions in the content.