Private Placement of Shares

S 42 read with Companies (Prospectus & Allotment of Securities) Rules,2014 as amended vide Second Amendment Rules,2018. S 42(3)-Any offer or invitation to subscribe or issue of shares to a select group of persons by a company (other than by way of public offer) can be done by private placement offer cum application. A private placement can be done only subject to the following conditions

(1) A Co may subject to provisions in S 42, make a private placement of securities (1A) A Co shall not make an offer or invitation to subscribe to securities through private placement unless the proposal has been previously approved by the shareholders of the company, by a special resolution for each of the offers or invitations-Companies (Prospectus & Allotment of Securities) Second Amendment Rules,2018. Sahara India Real Estate Corp. Ltd v. SEBI

(2) Placement can be made only to a select group of people identified by the board (referred to as identified persons) whose number shall not exceed 50 or 200 in a financial year (excluding the qualified institutional buyers & employees of the co being offered securities under ESOP).

(3)A Co making private placement shall issue private placement offer & application in such form & manner as prescribed to identified persons, whose names & addresses are recorded by the company in such manner as prescribed. Private placement offer & application shall not carry any right of renunciation.

(4) Every identified person willing to subscribe to the private placement issue shall apply in the private placement & application issued to such person along with subscription money paid either by cheque or DD or other banking channel & not by cash.

(5) No fresh offer or invitation shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the Co.

(6) A Co making an offer or invitation under this section shall allot its securities within 60 days from the date of receipt of application money for such securities & 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 expiry of 60 days & if the Co fails to repay the application money within the said period it shall be liable to repay that money with interest at 12% per annum from the expiry of the 60th day.

(7) No Co issuing securities under his section shall release any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public at large about such an issue.

(8) A Co making any allotment of securities u/s shall file with the Registrar a return of allotment within 15 days from the date of allotment in such manner as prescribed, including a complete list of all allottees, with their full names, number of securities allotted & such other relevant information as may be prescribed.

(9) If a Co defaults in filing the return of allotment within the period prescribed u/ss8, its promoters & directors shall be liable to a penalty for each default of 1000 for each day during which such default continues but not exceeding 25 lakhs.

(10) Subject to ss11if a Co makes an offer or accepts monies in contravention of this section, the Co, its promoters & directors shall be liable for a penalty which may extend to the amount raised throughout the private placement or 2 crores, whichever is lower, & the Co shall also refund all monies with interest as specified in SS(6) to subscribers within a period of 30 days of the order of imposing a penalty.

(11) Notwithstanding anything contained in SS9 & SS10any private placement issue not made in compliance of the provisions of SS2 shall be deemed to be a public offer & all the provisions of this Act & the securities Contract Act 1956 & the SEBI Act 1992 shall be applicable.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.