Private Placement: Section 42 of Companies Act 2013

Section 42 of the Companies Act 2013 deals with private placement of securities by companies. Private placement refers to the process of raising capital by issuing securities to a selected group of investors, rather than offering them to the public at large.

According to Section 42, a company can issue securities through private placement by way of a special resolution passed in a general meeting. The securities can only be issued to a maximum of 200 persons in a financial year, excluding qualified institutional buyers and employees of the company.

The company must also comply with the following conditions while issuing securities through private placement:

The offer of securities must be made only to persons whose names are recorded by the company prior to the invitation to subscribe.
The offer must be made only to those persons who have given a written consent to receive the offer.
The securities must be issued within 60 days from the receipt of the application money.
The company cannot invite or accept any money as subscripttion unless it has filed the offer letter with the Registrar of Companies.
The company must use the application money received only for the purpose for which the securities are being issued.
The company must allot the securities within 15 days from the date of receipt of the application money.
The securities must be issued in dematerialized form, except in cases where the securities are issued to fewer than 200 persons.

You've shared a great summary of Section 42 of the Companies Act, 2013, which governs private placements of securities by companies in India. To add a bit more clarity and key points:

Key Highlights of Section 42 - Private Placement

Private Placement means offering securities (shares, debentures, etc.) to a select group of persons, not the public.
The maximum number of persons to whom the offer can be made in a financial year is 200 (excluding qualified institutional buyers and employees under ESOPs).
Before making the offer:
- The company must record the names of all the proposed invitees in its books.
- Written consent from each invitee to receive the offer is required.
Offer Letter / Private Placement Offer Letter (PPO) must be filed with the Registrar of Companies (ROC) before accepting any application money.
The company must receive the application money and allot securities within prescribed timelines:
- Allotment within 15 days from receipt of application money.
- If allotment is not done within 15 days, money must be refunded within 15 days thereafter, else interest is payable.
The application money received must be used only for the specified purpose.
Securities are generally issued in dematerialized form, except when the number of allottees is fewer than 200.

Compliance checklist:

Pass Special Resolution in General Meeting.
Maintain private placement offer letter and related documents.
File PAS-4 (return of allotment) and PAS-5 (private placement offer letter filing) with ROC.
Follow timelines strictly to avoid penalties.