Private Placement means any offer of securities or invitation to subscribe securities to a select group of persons by a company other than by way of public offer through issue of a private placement offer letter and which satisfies the conditions specified in Section 42;
Maximum Number of Persons to whom offer can be made and other incidental maters;
Private Placement shall be made to such number of persons not exceeding two hundred persons (200) in the aggregate in a financial year. Important to note that any offer or invitation made to Qualified institutional buyers, or to employees of the company under the scheme of employees stock option shall not be considered while calculating the limit of two hundred persons.
Value of such offer or invitation per person shall be with an investment size of not less than twenty thousand rupees of face value of the securities
Payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank Account from where such payments for subscriptions have been received.
Private Placement to be approved in Special Resolution
The Company shall not make a private placement of its securities unless;
The proposed offer of securities or invitation to subscribe securities have been previously approved by shareholders of the company, by special Resolution for each offers or invitations.
In the explanatory statement annexed to the notice for the General Meeting the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed.
Mode of payment of subscription Money
Through Cheque or demand draft or other banking channels but not by cash
Time Limit for Allotment and payment of interest/ refund of subscription money otherwise
A Company making an offer or invitation shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within 15 days from the date of completion of sixty days and if the company fails to repay the application money within aforesaid period, it shall be liable to repay that money with interest at the rate of twelve percent per annum from the expiry of the sixtieth day
Subscription money to be kept in seperate Bank Account (Scheduled Bank)
The money shall not be utilised for any other purpose other than;
- for adjustment against allotment of securities
- for repayment of monies where the company is unable to allot securities
Offer to be made specifically addressing persons
Private Placement shall be made only to such persons whose names are recorded by the company prior to invitation to subscribe, and that such person shall receive the offer by name and that a complete record of such offers shall be kept by the company
Important points to be kept in mind;
- Offer letter in Form PAS 4
- Offer shall not be made to more than 200 persons excluding QIBs and employees
- Monies payable shall not be in cash
- monies shall be in scheduled bank kept separately
- allotment within 60 days of monies received
- Offer only to be made to those whose names are recorded by the company
- Record shall be in Form PAS
- Copy of Record shall be filed with ROC along with Form PAS 4 within 15* days
- Within 30 days of circulation of private placement offer letter inform registrar
- The company shall not use public advertisement, any media marketing or any agents
- Return of allotment of securities under Section 42 in Form PAS 3 to be filed with ROC within 30 days
*Ministry of Corporate Affairs has notified the amended Section 42 and its corresponding Rule No. 14 of the Companies Act, 2013 with effect from August 07, 2018.
Compliances with the Registrar;
*Ministry of Corporate Affairs has notified the amended Section 42 and its corresponding Rule No. 14 of the Companies Act, 2013 with effect from August 07, 2018.
(a) Deletion of requirement w.r.t. value of offer or invitation per person: The requirement of the value of offer or invitation per person of INR 20,000/- of face value of the securities has been done away with.
(b) Usage of Share Application Money: Now a company is not permitted to utilize the share application money received by it unless (i) allotment is made; and (ii) the return of allotment, in e-form PAS – 3, is filed with the Registrar of Companies.
(c) Reduction in time period for filing e-form PAS – 3: Now, a company is required to file the return of allotment within 15 days of allotment instead of 30 days.
(d) Separate penal provisions for non-filing of e-form PAS – 3: Where a company defaults in filing e-form PAS – 3 within 15 days of allotment, the company, its promoters and directors shall be liable with a penalty INR 1,000/- per day but not exceeding INR 25,00,000/-.
(e) Common private placement offer cum application form: The form PAS-4 has been revised and has a small section of application letter that needs to be filed in by the applicant. This application needs to be submitted by the applicant along with subscription money paid either by cheque, demand draft or other banking channel and not by cash.
(f) Fresh offer prior to allotment: Earlier there was a restriction that no fresh offer or invitation can be made unless the allotment w.r.t. any earlier offer has been completed or the offer has been withdrawn or abandoned. Now a carve out has been provided that where he number of persons to whom the offer is made does not exceed 200, the company may, at any time, make more than one issue of securities to such class of identified persons.
(g) Restriction on rights of renunciation: The revised section specifically restricts any right of renunciation of the private placement offer that is been made by the issuer company. The earlier section and rules did not have the said restriction.
(h) Revision of penalty amount: The penal provision has been revised from ‘the amount involved in the offer or invitation or Rupees Two Crore, whichever is higher” to ‘the amount involved in the offer or invitation or Rupees Two Crore, whichever is lower”.
Please find herewith the links to the commencement notification and the revised rules:
Compliances with the Registrar;
Procedure
for Private Placement
1.
Check provisions in Article of Association Of
Company.
2.
Call Board Meeting:
ü Prepare Offer Letter
ü Make Proposal for Private Placement
ü Prepare list of persons to whom option will be
given
ü Call EGM
3.
In EGM:
ü Pass SR (will be valid for 12 months)
ü If not completed Private Placement in 12 Months
pass another SR
ü Approve Draft Offer Letter by SR
4.
File MGT-14 with ROC (Notice of EGM, CTC of SR
Minutes will be attached with it)
5.
Issue offer letter in PAS-4 within 30 days of
record of name of persons:
ü Application form serially numbered
ü Address to the persons to whom the offer is
made
6.
Prepare complete
record of Private Placement in PAS-5.
7.
File PAS-4 + PAS-5 with ROC within 30 days of
issue of offer letter in GNL-2
8.
Make Allotment of shares within 60 days of
receipt of Money from the persons to whom right was given.
9.
Called BM for allotment of shares
10.
File PAS-3 with Roc within 30 days if
Allotment. (List of Allottees, BR for allotment of share will be attached)
11.
File Form MGT-14 along with Resolution pass in
Board meeting for allotment of shares.
12.
Issue Share Certificates.
For more details, Contact CS Neha Seth at csnehaseth@gmail.com or call us at +919871903449
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