- What is Private Placement?
- Offer letter for Private Placement
- In case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year.
- Steps to Private Placements as per Companies Act, 2013
What is Private Placement?
Private Placement means an offering of securities or invitation for subscribing the securities (equity or securities that can be converted into equity) only to the selected group of people by the company, rather than offering to the public, by issuing of a private placement offer letter. Any company whether private or public can make private placement through the issue of the offer letter.
Offer letter for Private Placement
- This offer is only applicable for non-existing shareholders of the company.
- The offer of securities or invitation to subscribe securities should not exceed more than 200 in the aggregate in a financial year (excluding QIB and Employee under ESOP).
- In case more than 200 people are offered this private placement irrespective of any receipt of payment then this will be considered as the public offer. (Except NBFS and Housing Finance Company)
- In this offer, the size of the investment should not be less than twenty thousand per person of the face value of securities.
- Records and details of the bank accounts of the person with which the payment is done should be kept who is offered this private placement. In case of Joint Account, the preferred name is considered.
- Before preceding with the next offer, the previous offer should be finished.
- The offer letter can be manually written or can be printed.
- The letter should be sent within the thirty days of recording the names.
- Offer can be made only through prior approval in Special Resolution. The validity of Resolution is 12 months.
- Explanatory statement shall be given for basis or justification for the price (including premium, if any)
- Complete recording of the Private Placement should be made in PAS 5. A copy of such record along with the private placement offer letter in Form PAS-4 shall be filed with the Registrar and where the company is listed, with the Securities and Exchange Board within a period of 30 days of circulation of the private placement offer letter.
- The date of the offer letter shall be treated as the date of circulation.
- Return of Allotment shall be filed along with a complete list of all security holders containing- the full name, address, Permanent Account Number and E-mail ID of such security holder; the class of security holders; the date of allotment of security ;
- The number of securities held, nominal value and amount paid on such securities and particulars of consideration received if the securities were issued for consideration other than cash. The price of the security has to be justified and it also requires a valuation report by a Registered Valuer (which can be a Company Secretary, Chartered accountant or a Cost Accountant).
- The allotment has to be completed within 60 days, otherwise, from the 15th day of the end of the 60th day, the share application monies have to be repaid. In the event of failure, interest at 12% is required to be paid.
- If there is a Foreign Direct Investment, RBI has allowed for 180 days for allotment.
- If the Shares are note allotted within 60 days from the receipt of amount or refund is not provided within 15 days from the end of 60 days the same shall be treated as DEPOSIT.
- Offer letter shall be: Serially numbered Addressed specifically to the person.
In case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year.
Steps to Private Placements as per Companies Act, 2013
- Check the provisions in the Articles.
- Send Notice for convening Board Meeting at least 7 days before convening the Board Meeting for the following purpose: To Prepare Offer Letter Make Proposal for Private Placement Prepare list of persons to whom option will be given Call Extra Ordinary General Meeting (EGM).
- Draft the private placement offer letter.
- Draft Notice to be sent to shareholders for the convening of Extra Ordinary General Meeting for the following: Passing Special Resolution Approval of Draft Offer Letter by Special Resolution.
- Special Resolution shall be valid for a period of 12 months.
- File Form MGT -14 with the ROC within 30 days of passing Special Resolution.
- Issue offer letter in PAS-4 within 30 days of record of the name of persons.
- Prepare complete record of Private Placement in PAS-5.
- File Form PAS-4 and Form PAS-5 with ROC within 30 days of issue of offer letter in Form GNL-2.
- Make Allotment of shares within 60 days of receipt of Money from the persons to whom right was given.
- Call Board Meeting for allotment of shares File PAS-3 with ROC within 30 days of Allotment.
- Issue share certificates and update minute’s book and registers.
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