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10 Most Important Pointers on Private Placement/ Preferential Issue (Companies Act, 2013)

September 19, 2020     by Pooja Dhiman

Over the last few years, there have been some major amendments notified by the Ministry of Corporate Affairs (MCA) in the provisions related to the private placement by which it reduces the timelines of filing of form PAS-3, utilisation of share money, no renunciation rights, etc.

Here, we have highlighted the top 10 important pointers and a process flow of private placement and preferential issue.

IMPORTANT POINTERS

  1. An offer or invitation to subscribe securities under private placement shall not be made to more than two hundred persons in aggregate in a financial year (excluding QIBs and employees through ESOP).

  2. The Company issuing securities under private placement shall not release any public advertisements or utilize any media and distribution channels to inform offer to the public at large.

  3. The price of the securities to be issued shall be determined on the basis of the valuation report of a registered valuer.

  4. Copy of special resolution shall require to be filed in form MGT-14 within 30 days of passing of such resolution in the shareholders’ meeting.

  5. The offer shall be made by the company to the selected group of persons in form PAS-4 and shall maintain a complete record in form PAS-5.

  6. The payment for subscription of shares shall have to be mandatorily made from the bank account of the person subscribing such shares.

  7. Monies received on the application shall be kept in a separate bank account in a scheduled bank.

  8. The application money received cannot be utilised for any purpose other than allotment.

  9. The allotment of the securities is required to be made within sixty days from the date of receipt of the application money. If not allotted, the application money is to be returned within next 15 days.

  10. Company shall not utilize monies raised through private placement unless allotment is made and return of allotment (in the form PAS-3 within 15 days) has been filed with the RoC.

Process Flow: Preferential Issue/ Private Placement

To understand the detailed provisions and procedure of the private placement/ preferential issue please visit Issue of shares by Private Placement (includes Preferential Issue).

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