Section 42 of Companies Act 2013 and Rule 14 of Companies (Prospectus and Allotment of Securities) Rules apply on Private Placement of Securities.
It means any offer or invitation to subscribe securities to a specified group of persons by a company through the issue of Private placement offer letter. A Company making this offer has to comply with lesser regulatory provisions.
The Company making the Private Placement of Securities needs to consider the following points:-
The following procedure applies in case of Private Placement Offer.
Company shall hold the Board Meeting and shall discuss in the meeting following points:-
Approve the list of persons to whom a Private placement offer shall be made
Approve Draft Offer letter
Call the general meeting
The company shall hold the General Meeting to pass the Special resolution for approving the Private placement of shares.
Company shall file Special resolution with ROC in Form MGT-14 within 30 days of General Meeting.
The Company shall circulate the offer letter among the proposed allottees to the securities in Form PAS-4.
Company shall keep the application money of Private placement in a separate Bank Account in a Scheduled Bank Account.
The company shall make the allotment of securities within 60 days of receipt of the Application money.
If the company fails to do so, it shall refund the money within the next 15 days
If the company fails to refund money then it shall be liable to repay money along with interest @12% p.a. from the 60th day from receipt of application money.
Company shall file return of allotment in Form PAS-3 with ROC within 15 days of allotment.
Company shall issue Share certificates within 2 months from the date of allotment
At last, Register of members will be updated by adding the particulars of the new allottees of securities.
Company shall maintain the complete record of Private Placement in Form PAS-5.
No, a Company making the Private placement offer cannot accept the subscription money in cash. It can accept such subscription money only through cheque or demand draft or any other banking channel.
Yes, it is mandatory to file a return of allotment with ROC within 30 days of Allotment of securities in Form PAS-3.
Yes, it is mandatory for a Company making a Private Placement offer to take prior approval of shareholders by passing Special Resolution in the General Meeting.