Private Placement
{Section 42 of Companies Act, 2013 with Rule 14 of Companies
(Prospectus and Allotment of Securities Rules, 2014)}
1. A Company can make Private Placement through issue of Private Placement offer letter (Form PAS-4 as attachment in Form GNL-2).
Offer Letter shall be serially numbered, contain proper address of the person and shall be sent to him either in writing or in electronic mode. (Rule 14 (1))
2. Securities shall be issued only to Max 50 persons or such higher number as may be prescribed i.e. 200 persons {Rule 14 (2)(b)}
Persons exclude in calculation of 200; qualified institutional buyers and employees of the company whom already shares issued under ESOP.
3. No fresh allotment shall be made unless earlier allotment has been completed or withdrawn by the Company.
4. If number of persons exceeds 200 then it shall be considered as public offer.
5. Subscription money shall be made through cheque or demand draft but not by cash.
6. A Company shall make allotment within 60 days from the date of receipt of application money and if Company fails to allot securities within time then it shall repay the application money within 15 days and after 15 days interest shall be paid @12% p.a from the expiry of sixtieth day.
Provided that a separate bank account has to be opened for private placement and application money should be submitted in that account only and that money should be used only for 2 purposes:
a) For allotment of securities.
b) For repayment of money if company is unable to allot securities
7. Allotment shall be made only to those persons whose names are recorded by the company prior to invitation to subscribe. And complete information about offer shall be filed to ROC within 30 days of circulation offer letter. (Form MGT-14 should be filed)
8. No Public Advertisement is allowed regarding private placement offer.
9. Form PAS-3 should be filed within 30 days to ROC. And it includes list of shareholders and Board Resolution.
10. In case of Default then Company, Promoters and Directors shall be liable for Penalty:
- Amount involved in offer Or
- Rs. 2 Crore Whichever is higher
- And Company shall refund all subscription money within 30 days of order imposing regarding penalty
Rule 14(2)
1. Approval of Shareholders shall be taken by passing Special Resolution for issue of private placement offer.(Form MGT-14 within 30 days from passing of special resolution)
Provided that explanatory statement shall be attached with special resolution.
Provided that in case of offer of non convertible debenture then earlier special resolution for approval of issue of non convertible debenture is sufficient if allotment is done within 6 months from the passing of that special resolution.
2. Investment size: Rs 20,000 per person of face value of securities
Rule 14(3)
1. Company shall maintain complete record of private placement offer (Form PAS-5)
2. Private Placement offer letter (Form PAS-4) shall be filed to Roc
And if company is listed with SEBI then PAS-4 shall be submitted within 30 days.
*Date of private placement offer letter = date of circulation of private placement offer letter
Rule 14(5)
1. Proviso of b, c of Sub rule 2 is not applicable to non banking financial companies and housing finance companies if these companies are complying regulation made by their banks.
Form PAS-3: Board Resolution, List of Allottees, Form PAS-5
Form MGT-14 (Allotment): Board Resolution
Form MGT-14 (For EGM Notice): EGM Notice, Explanatory Statement and Extract
Form GNL-2 (Private Placement offer letter): Form PAS-4, PAS-5, Notice extracts of EGM, Cash Flow Statement and Valuation report.
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