Flowchart for Private Placement of Shares

CS Divesh Goyal , Last updated: 23 May 2025
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Introduction

Private placement is a strategic method of raising capital, allowing companies to issue securities to a select group of investors without resorting to public issuance. Governed primarily by Section 42 of the Companies Act, 2013, and the accompanying Companies (Prospectus and Allotment of Securities) Rules, 2014, this route demands stringent compliance, detailed documentation, and adherence to prescribed timelines. Unlike public offers, private placements offer greater control and confidentiality, but come with statutory responsibilities such as filing specific forms, maintaining registers, and observing restrictions on the number of investors.

Flowchart for Private Placement of Shares

This article provides a comprehensive flowchart, supported by statutory references, applicable rules, forms, and practical insights, to guide professionals in executing a compliant private placement process.

S. No.

Days

Particular

Documents/ Information

Forms/ Section

Discussion and Decision

Decide the List of persons to whom offer will be made.
Obtain Valuation Report to decide offer price
Decide No. of Shares to be offered.
Term of Payment

Sec 42, Rule 14

Notice to call Board Meeting for Issue of Shares.

Notice of Board Meeting
Agenda of Board Meeting

SS 1

0+8

Hold the Board Meeting

Adoption of List of persons to whom offer to be given.
CTC of Board Resolution for Issuance of Shares
Approval of Draft Letter of Offer i.e. PAS 4
Adoption of Valuation Report
Issue Notice of General Meeting
Authorize a Director to file Forms.

Sec 42, Rule 14

Hold General Meeting

Passing of Special Resolution for issuance of Shares
Adoption of Letter of Offer i.e. PAS 4

Sec 42(2), 102

Filing of MGT 14

Immediately after the General Meeting file MGT 14 with Special Resolution to ROC

Issue Letter of Offer

Issue Letter of Offer selected persons through writing or in electronic mode only after filing of MGT 14
Along with Application form serially numbered

Sec 42(3), Rule 14(3)

Offer open for at least 30 days

Prepare Record of Private Placement in form PAS 5

Sec 42(7), Rule 14(3)

Within 30 days of the issuance of letter of offer

Receive Share Application Money form in Separate Bank Account
Receive Acceptance Letter

Sec 42(6)

Notice Calling Board Meeting

Notice of Board Meeting
Agenda of Board Meeting

Sec 42(4)

10.

Hold the Board Meeting (within 60 days of receipt of Money)

Pass Board Resolution for allotment of Shares
List of Allottees

Sec 42(4)

11.

105

Filing of Form PAS 3

Within 15 days of the Board Meeting

Sec 42(8), Rule 14(6)

12.

Issue Share Certificate

Within 2 months of allotment in form Sh-1

Sec 56

NOTE

MGT-14: File form with ROC within 30 days of passing of Special Resolution for issue of shares

Attachment:

CTC of Board Resolution for Issue of Letter of offer for right issue of shares.

PAS-3: File form with ROC within 15 days of Passing of Board Resolution for Allotment of Shares.

Attachment:

CTC of Board Resolution for allotment of Shares.
List of Allottees.

Conclusion

In conclusion, while private placement serves as an efficient mechanism for capital infusion without diluting control extensively, it is surrounded by a robust legal framework to ensure transparency and regulatory oversight. From convening board and shareholder meetings to timely filings with the Registrar of Companies and maintaining statutory registers, each step is critical. Non-compliance not only attracts penalties but may also render the offer invalid. Therefore, a well-structured approach and timely professional intervention are essential to navigate the procedural landscape effectively.

The flowchart and compliance table provided herein serve as a practical guide for professionals-Company Secretaries, Chartered Accountants, and compliance officers-to ensure seamless execution of private placements in line with the law.