Issue of shares, private limited company

As far as unlisted companies are concerned, for issues to residents:

a) For rights issue u/s 62(1)(a):  No pricing guideline has been prescribed in the Act/Rules.  Hence one can say that in order to make the issue attractive for existing shareholders, the price could be less than price as per valuation report.

b) For private placement u/s 42:  PAS-4 (Offer letter) requires justification of the issue price to be disclosed.  In this case it will be difficult to give justification if the issue price is less than price as per valuation report since the directors must act in the interest of the company.

c) For preferential allotment u/s 62(1)(c):  Rule 13 provides that the issue price shall  not be less than the price as per valuation report of a registered valuer/independent CA having minimum 10 years of experience.

In case of issue to non-residents, FEMA regulations provide that the price shall not be less than price as per share valuation report.