TOPIC-Private placement-Section 42

Private placement-Section 42
• PART II CHAPTER 3
• To be read with RULE 14 OF COMPANIES PROSPECTUS AND
ALLOTMENT OF SECURITIES RULES,2014
• Specific Offer
• To ‘Identified Persons’ –to be identified by BOD
• Offer or invitation for subscription of securities on PRIVATE
PLACEMENT(PP)
• Co. issues PP Offer Letter to selected persons i.e. names to be kept
with the company
• Maximum 50 persons at a time(COMPANIES Act) ;200 persons in a
Financial year(LIMIT RAISED IN Rule)
• Above limit excluding QIB and employees under stock.
Private placement-Section 42

• This limit is per Security

• If this limit is crossed, to be treated as Public offer
• This limit does not apply to NBFC /HFC(Follow RBI GUIDELINES)
• Fresh offer letter cannot be given uptil earlier offer
completed/withdrawn
• If violation of any provision, to be treated as public offer.
• No public announcement or advertisement/not to use any media,
marketing or distribution channel to inform abt the issue
• Company will maintain the record of INVITEES in a Form- PAS-
5(Prospectus and Allotment of Securities)
• Within 30 days company to give PRIVATE PLACEMENT OFFER AND
APPLICATION PAS-4(by ind.name, no renunciation)
• Application + subscription money given by IDENTIFIED PERSONS
• Cheque/dd/other banking channel and not in cash
• Kept separate account in scheduled bank
• company to Allot them within 60 days ,if not allotted within 60 days,
then refund within 15 days from completion of those 60 days
• Otherwise interest @12 % p.a from 61st day
Private placement-Section 42
• If securities are allotted within above time frame -‘Return’ of
allotment to be filed to ROC-(Form PAS-3)
• This form is to be filed within 15 days of allotment.
• If PAS-3 not filed within 15 days- penalty on
company/director/promoter Rs 1000/-per day(max 25 lk)
List of security holders with details such as full names, address, no.
of securities allotted etc.(In PAS-3)