CS Rajnish Pandey
Quick Summary
Introduction to the Topic As per the Company Act 2013, read with the SEBI (ICDR) Regulations 2018, as amended the companies in India can raise funds through different methods including preferential allotment, right issue, IPOs, employee stock option plan (ESOP), and sweat equity shares. Among all t
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FAQ :
Preferential allotment is a method for companies to raise funds by issuing shares to a select group of individuals, venture capitalists, or other entities, not exceeding 200 persons in aggregate in a financial year.
The price is determined by a registered valuer in accordance with the Companies Act, 2013. For listed companies, SEBI guidelines apply, and for unlisted companies, internationally accepted pricing methodologies certified by a Chartered Accountant or Merchant Banker are used.
Yes, shareholder consent is required through a special resolution, as preferential allotment can dilute the voting rights of existing shareholders.
The procedure involves obtaining letters of interest, intimating stock exchanges, convening audit and board meetings, seeking shareholder approval via a general meeting or postal ballot, opening a separate bank account, and submitting various forms and approvals to SEBI and stock exchanges.
The allotment process, including circulating the offer letter, receiving funds, and making the allotment, should ideally be completed within 15 days from the date of shareholder approval or in-principal approval from stock exchanges, whichever is later.
A listed company must apply for listing approval to the stock exchange(s) within 20 days from the date of allotment of securities.
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