Private placement

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1. PRIVATE PLACEMENT PRIVATE PLACEMENT (PP) UNDER COMPANIES ACT, 2013 Introduction : We all know  Companies Act, 2013  provides various options to issue Securities (Shares, Debentures or any other type of Securities). One of these options is Private Placement. The definition of Private Placement explains when the Companies have to follow the provisions. Let’s look into the Definition and the Provisions .

2. Definition of Private Placement procedure under Companies Act, 2013: Explanation -I to Section 42(3) defines the Private Placement; “Private Placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in this section. Let us split the definition and make it easy to understand Private Placement is: – any offer or invitation by a company – to subscribe or issue of securities – to a select group of persons, – other than by way of public offer,

3. List of Sections and Rules Applicable to Private Placement:

4. Provisions: Now we understood what is the definition, but what are the provisions to be followed while issuing securities under Private placement (PP)? i . To whom securities can be issued under PP? The securities under PP can be issued /offered only to a select group of persons who have been identified by the Board . ii. Private Placement offer can be given to how may persons? The offer of securities or invitation to subscribe securities, shall be made to not more than 50 persons in a single offer or not more than 200 persons in the aggregate in a financial year (excluding qualified institutional buyers and employees of the company being offered securities under ESOP). This restriction would be read for all the securities combined together in a Financial Year .

5. Step By Step Procedure For Private Placement 1.    Hold Board Meeting 2.   Hold General Meeting 3.   File form MGT-14 To approve the list of identified persons To approve the draft offer letter To call GM To pass special resolution approving PP and approving offer letter File the Special Resolution in Form MGT-14 within 30 days from the date of EGM

6. 4.   Circulate the Offer Letter (PAS-4)  PAS-4 to be circulated to the identified persons It can be circulated only after filing MGT-15 5.   Receive the Application money The Application money to be received and kept in a Separate Bank to be done within 60 days from the date of receipt of Application Mone 6.   Allotment Allotment to be done within 60 days from the date of receipt of Application Money

7. 7.   File Return of Allotment The Return of Allotment in Form PAS-3 to be filed within 15 days from the date of allotment 8 .    Utilization of amount  The amount can be utilise only after filing PAS-3 9 .    Other incidental matters Issue of Share Certificates within 2 months from the date of allotment Updating the Register of Members