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Private placement of securities

Vamshi (Manager) (26 Points)

23 January 2014

I have one question that has been troubling me. We all read about the SC verdict in the Sahara case. In any private placement, one has to reach out to atleast 100-200 people as everyone may not be interested in investing. Out of these 100-200 only around 20-30 might invest. Now my question is - if i want to raise money for a private company and send invitation to around 100 people with the condition that i will take money only from <50, would that still be construed as a public issue.

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6 Replies

shubham (student) (238 Points)
Replied 23 January 2014

no in my opinion it is not a public issue because for an issue to be a public issue the basic characteristic is that anyone can accept the offer even when it is not directly offered to him . but here since the offer to subscribe is made to certain identified prsons therefore it will not be a public issue. i am not 100% sure . wait for others to reply also.

Vamshi (Manager) (26 Points)
Replied 23 January 2014

Shubham - however if i post my fund raising intention on a website where it can be seen by 1000s of people, but i specify that i will accept funds from only 50, would that still be a public offer.

shubham (student) (238 Points)
Replied 23 January 2014

first of all a privateplacement can never be advertised on a website newspaper etc. moreover according to companies amendment act 2000 if offer is made to 50 or more persons it is deemed to be a public issue.

shubham (student) (238 Points)
Replied 23 January 2014

therefore if allotment or acceptance as in your question is for 50 people it is a public issue as now its on website can be accepted by anyone.

Vamshi (Manager) (26 Points)
Replied 23 January 2014

Well just because it is on a website does not mean it can be accepted by anyone. As the company raising funds, i will issue shares to only <50 people, it is my wish whom to give shares and whom not to.

Anil Dhiman (Company Secretary) (114 Points)
Replied 24 January 2014

Please note that private placement is the offer for obtaining application for subscripttion of company's shares by the one's who have been specifically asked to invest. You need to identify a group of individuals and corporates who would be investing in your company ,,,say 100 or 200. Now later on, it is the discretion of the board of the company to decide whom to be allotted shares ( the number of prospective alllotttees would be 49 and not more than that.