CA Ridhi Bimra
1. As per section 42 of companies act 2013, a company may, subject to provisions of this section, make a private placement of securities.
2. A private placement shall be made only to a selected group of persons who have been identified by the board, whose number shall not exceed fifty or such higher amount as may be prescribed.
Note: Selected group of persons are known as Identified persons.
Note: while calculating fifty number to whom securities are to be issued Qualified Institutional buyer and employees of the company being offered securities under a scheme of employees of stock option in terms provisions of section 62(1)(B) are not included.
3. A company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons whose name and addresses are recorded by the company in such manner as may be prescribed.
Note: Private placement offer and application shall not carry any right of renunciation.
4. Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person along with subscription money paid either by cheque or demand draft or other banking channel or not by cash.
Provided that a company shall not utilize monies raised through private placement unless allotment is made and return of allotment is filed with registrar in accordance with sub section 8 of this section.
5. No fresh offer or invitation under this section shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company.
Note: Subject to maximum number of identified persons above mentioned , a company may at any time , make more than one issue of securities to such class of identified persons as may be prescribed.
6. A company making an offer or invitation under this section shall allot its securities within 60 days from the date of receipt of the application money for such securities.
Note: If company is not able to allot the securities within 60 days it shall repay the application money to the subscribers within 15 days from the expiry of sixty days. Example: if 60 days expires on 31january 2018 , company should repay application money till 15 february.
Note: If company fails to repay the application money within aforesaid period , it shall be liable to repay that money with interest at the rate of 12% p.a. from the expiry of 60th day.
Note: Monies received on application under this section shall be kept in a separate bank account in scheduled bank and shall not be utilized for any purpose other than:
(i) For adjustment against allotment of securities; or
(ii) For the repayment of monies where the company is unable to allot securities.
7. No company issuing securities under this section shall release any public advertisements or utilize any media , marketing or distribution channels or agents to inform the public at large about such an issue.
8. A company making allotment of securities under this section, shall file with Registrar a return of allotment within 15 days from the date of allotment in such manner as may be prescribed, including complete list all allottees, with their names, addresses, number of securities allotted and such other relevant information as may be prescribed.
9. If the company defaults in filling the return within the time prescribed under this section , its promoters and directors shall be liable to penalty for each default of 1000 rupees for each day during which default continues but not exceeding twenty five lakh rupees.
10. If the company makes an offer or accepts money in contravention of this section, the company, its promoters, and directors shall be liable to penalty which may extend to the amount raised through the private placement or two crore rupees whichever is lower. And company shall refund all money with interest.
11. Any private placement issue not made in compliance of the provisions of this section shall be deemed to be public offer. And all the provisions of public offer shall be applied accordingly.