Difference Between Private Placement and Preferential Allotment under Companies Act, 2013

S.NO.

POINT OF DIFFRENCE

PRIVATE PLACEMENT

PREFERENTIAL ALLOTMENT

1.

Governing Section

Governed under the provisions of Section 42 of Companies Act,2013

Governed under the provisions of Section 62(1)(c) of Companies Act,2013

2.

Associated Rule

 Rule 14 of Companies( Prospectus and Allotment of Securities ) Rules, 2014

Rule 13 of Companies (Issue of Share Capital and Debentures) Rules, 2014

3.

Issue of

Securities (as defined under Section 2(81) of Companies Act, 2013) which says

“Securities means the Securities defined in clause (h) of Section 2(81) of Securities Contracts (Regulation) Act, 1956.

Issue of Shares or Securities

means equity shares, fully or partially convertible debentures or any other securities, which would be convertible or exchanged into Equity Shares.

4.

Offer Document

Prescribed Document i.e. Private Placement Offer Letter (PAS 4)

No such format is prescribed

5.

Limit on Number of Allottees

Offer or  Invitation of Securities shall be made to Maximum of 50 Persons at a time

And

200 Persons in aggregate during a Financial Year and this limit of 50/200 shall exclude QIBs( Qualified Institutional Buyers) and Employees who are being offered securities under Employee Stock Option Scheme under section 62(1)(b) of Companies Act,2013

The limit as applicable on Private Placement shall apply as it is as per Rule 13(1) of Companies( Prospectus and Allotment of Securities ) Rules, 2014

6.

Consideration

Payment through cheque, Demand Draft or other bank channels but not by Cash.

Shares can be issued for Cash or for a Consideration other than Cash.

7.

Bank Account

Separate Bank Account in a Scheduled Bank is required to  keep the application money.   

Nothing Specifically Required.

8.

Valuation Report

 No Valuation Report is     required.

Valuation report is required.

9.

Authorization in Articles

No authorization in AOA is required

Authorization in AOA is required.

10.

Special Resolution

Prior Special Resolution is Required

Same

11.

Allotment

Within 60 Days of receipt of Application money.

Allotment shall be made within 12 months of passing the Special Resolution.

12.

Documents Involved

PAS-4 (Private Placement Offer Letter)

PAS-3 (E Form required to be filed on MCA 21 portal

PAS 5 (Record of Private Placement Offers to be maintained by the Company)

E Form PAS-3 will be required to filed on MCA 21 portal as return of allotment