Important Points in Issue of Shares on Pvt Placement by a Company

IMPORTANT POINTS FOR ISSUE OF SHARES ON PRIVATE PLACEMENT BY A COMPANY

Section 42 of the Companies Act, 2013 read with

Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014.

By CS. Aashish Golcha, Practising Company Secretary

1)      Special Resolution to be passed by the Members for each offer made.

2)      Private Placement offer letter, as per Form PAS 4, to be issued to such persons whose name are recorded by the Company.

3)      Such offer not to be made to not more that 200 persons in aggregate in a financial year (QIB and person to whom ESOP are being issued not included in 200)

4)      Investment size per person shall not be less than Rs.20,000/-

5)      All monies payable towards subscription to be received ONLY by Cheque / draft / other banking channel but NOT BY CASH.

6)      Company to keep record of Bank Account from where such subscription amount is being received.

7)      Share to be allotted only to the person from whom money is received.

8)      Share to be allotted within 60 days from the date of receipt of money. Else money to be refunded within 15 days from the date of completion of 60 days. If the company is not able to make payment within the said 15 days, then it shall be liable to repay the money with interest at 12%

9)      Money received to be kept in separate bank account and to be used only for allotment of shares or refunding back to the applicant.

10)   No fresh offer to be made unless allotment with respect to previous offer has been completed.

11)   Company to maintain complete record of private placement offers in the Form PAS 5. A Copy of the same has to be filed along with PAS 4 with the Registrar.

12)   Return of Allotment of securities to be filed in Form PAS 3 along with list of allottees.

13)   If offer made is not in compliance with this Section, then the same shall be treated as “Public Offer” and all the rules of Public offer to be complied with.

14)   If a company contravenes this Section and makes an offer, then company, promoters and directors will be liable to the extent of amount involved in the offer or Rs.2 Crores, whichever is higher, and the company shall refund all the monies to the subscriber within a period of 30 days of the order imposing penalty.

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