Procedure of Issue of Equity Share through Private Placement (To Identified Persons)
Introduction: Issuing equity shares through private placement is a strategic option for companies seeking to raise capital from a select group of investors. This process, governed by strict legal and procedural frameworks, involves a series of steps designed to ensure transparency, regulatory compliance, and protection of shareholder interests. This article outlines the systematic procedure for issuing equity shares via private placement to identified persons, detailing the necessary actions, time frames, and documentation.
Steps for Issuing Equity Shares through Private Placement
| Step No. | Required Action | Timing | Key Documents |
|---|---|---|---|
| 1 | Notification of Board Meeting to Directors | At least 7 days before the Board Meeting, unless otherwise specified by the company’s Articles of Association. | Meeting Notice |
| 2 | Board Resolution for Equity Issue via Private Placement & General Meeting Schedule | During the Board Meeting | Board Resolution |
| 3 | General Meeting Notice Dispatch | At least 21 clear days before the General Meeting. | General Meeting Notice |
| 4 | General Meeting Resolution for Equity Issue & Approval of Identified Persons List | Must occur within 45 days from calling the General Meeting. | Special Resolution |
| 5 | Special Resolution Filing (MGT-14) with ROC | Within 30 days post-General Meeting. | Form MGT-14 |
| 6 | Offer Letter Preparation & Dispatch to Identified Persons | Timely manner post-Board Meeting | Form PAS-4 (Offer Letter) |
| 7 | Notice for Subsequent Board Meeting Post-Funding | At least 7 days before the Board Meeting, adhering to Articles of Association if applicable. | Meeting Notice |
| 8 | Board Resolution for Share Allotment | Within 60 days of fund receipt. | Board Resolution |
| 9 | Filing of Allotment Details (PAS-3) with ROC | Within 15 days of share allotment. | Form PAS-3 |
| 10 | Board Meeting Notice for Share Certificate Issuance | At least 7 days before the Board Meeting, per Articles of Association if specified. | Meeting Notice |
| 11 | Board Resolution for Share Certificate Issuance | Within 2 months of share allotment. | SH-1 (Share Certificate) |
| 12 | Maintain Identified Persons List (PAS-5) | As needed for records. | PAS-5 |
Conclusion: The procedure for issuing equity shares through private placement is meticulously designed to ensure compliance with regulatory requirements and safeguard the interests of all stakeholders involved. By adhering to the outlined steps, companies can effectively navigate the complexities of private placement, fostering a transparent, equitable, and efficient capital-raising process. This guide serves as a foundational resource for companies contemplating equity share issuance via private placement, emphasizing the criticality of detailed preparation, documentation, and regulatory adherence.
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