Private placement by a private company

Provisions of Section 81(1A) pertaining to private placement of shares are not applicable to private companies.  Hence subject to the provisions of the Articles, Board has power to issue fresh shares on private placement basis.  Approval of shareholders is not required.  Valuation report is not required as per Companies Act.  You have to refer to your Articles for the same.

Thanks a lot for your reply.

But. the management do not want to issue shares to the existing shareholders and is expecting new share holders. If that is that case, the present shareholders may object in future. So what would be your view, if the company get approval from members (at EGM) for this proposed private placement.

Also, if the management wants to issue private letter of offer to a selected group of new investor, will this be permitted by law. Please note that our Articles have permission to issue shares subject to provisions of companies Act. 

Kind Regards,

Ramesh

Yes, you can take approval of members in EGM even if not required under the Act or the Articles.  Companies Act does not restrict issue of shares to non- members in case of private company so long as total number of members after issue does not exceed 50.

Thanks a lot Mr Agarwal for your valuable views.

Regards,

Ramesh