Validity of eogm resolution passed for issuance of shares on private placement

In the context of private placement under the Companies Act, 2013, if a company has passed a Special Resolution (SR) at an Extra-Ordinary General Meeting (EOGM) for the issuance of shares but has not proceeded with the offer letter or received any application money, the validity of the resolution depends on the specific timelines and conditions prescribed by law.

Key Considerations Regarding Validity

1. Procedural Requirements: Under Section 42 of the Companies Act, 2013, and the Companies (Prospectus and Allotment of Securities) Rules, 2014, the company must file the Special Resolution (in Form MGT-14) with the Registrar of Companies (RoC) within 30 days of passing it. If this filing was not completed, the resolution may be procedurally incomplete.

2. Timeline for Offer: While the Act does not explicitly state an "expiry" date for a private placement resolution in the same way it does for other corporate actions, it is standard practice for such resolutions to have a specific validity period (often one year) as stated in the notice of the EOGM. If the notice or the resolution itself mentioned a specific timeframe for the offer to remain open, that timeframe governs the validity.

3. "Fresh Offer" Restrictions: Section 42 stipulates that a company cannot make a new offer or invitation of private placement if an earlier offer is still pending or has not been withdrawn. If you intend to proceed with the issuance now, you must ensure the previous offer is formally abandoned or withdrawn by the Board if you wish to pass a fresh resolution.

4. Current Status: Since no application money was received and no PAS-4 (offer letter) was issued, no "allotment" has occurred. Therefore, the company has not yet triggered the statutory timelines for allotment (60 days from receipt of application money) or return of allotment (15 days from allotment).

Recommended Action

• Review the EOGM Notice: Check the explanatory statement and the resolution text from the EOGM to see if a validity period was specified. If it was, and that period has expired, the resolution is no longer effective.

• Legal Compliance: Because you have not acted on the resolution, it is generally safer and more compliant to pass a fresh Board resolution and a fresh Special Resolution at a new EOGM. This ensures that:

  • The valuation report is current (as valuation must be relevant to the time of the offer).

  • The identified list of allottees is updated.

  • Compliance with current ROC filing requirements is maintained.

• Consult a Professional: Given that corporate law requirements (like MGT-14 filing and PAS-4 issuance) are strict, it is highly advisable to consult with a Company Secretary (CS) to review the previous minutes and ensure that the transition to a new resolution is handled without creating a "pending offer" conflict under Section 42.

Summary:

If no action was taken (no MGT-14 filed, no PAS-4 issued, no money received), the previous EOGM resolution is likely effectively dead or obsolete. To proceed with a private placement, the company should ideally treat the previous attempt as lapsed, formally abandon it through a Board resolution, and conduct a fresh process—including a new valuation, new Board approval, and a new EOGM to pass a valid Special Resolution.