According to sec 42(1) of the Companies act 2013, Private Placement means offer of securities or invitation to subscribe securities to a selected group of persons by a company (other than by way of public offer) through issue of offer letter.
Private placement shall be made only to such persons whose names are recorded by the company prior to the invitation to subscribe and that such person shall receive the offer by name. Company maintain the complete record of such offers in prescribed manner and file the same with the registrar within a period of 30 days of circulation of the offer letter.
In the private placement, if company fails to comply with the provision of sec 42 then such offer shall be treated as public offer and all the provision of the companies act, securities contract (regulation) act,1956 and SEBI act, 1992 are applicable and required to comply.
As per the provision of Sec 42 (6) of the companies act, 2013 the company shall allot its securities within 60 days from the date of receipt of application money, if it does not allot within 60 days then the application money shall be repaid within 15 days after the expiry of 60 days and if company does not pay money after the aforesaid period, the company is liable to repay the money with interest @ 12% per annum from the expiry of 60 days.
Procedure to make allotment through private placement:-
The board of director should ensure that issue is authorized by the article of association of the company. After ensuring hold the general meeting and pass the special resolution
Sent letter of offer in form PAS-4 along with application form to the proposed subscribers. The company shall file form MGT 14 along with fee with the registrar within 30 days of passing special resolution in general meeting.
The company shall maintain a complete record of private placement offers in Form PAS -5 and file the same with the registrar and Securities and Exchange board where the company is listed within 30days of circulation of the private placement offer letter.
The company shall file a return of allotment of securities in Form PAS -3 with the registrar within 30 days of allotment with fee and a complete list of all security holders containing the full name, address, PAN, class of security held; date of allotment of security held ; number of security held etc.
Company shall issue share certificates and update registers and also intimate the details of allotment of securities to depository immediately on allotment of such shares.
As per sub rule 5 of rule 14 of the Companies (Prospectus and Allotment of Securities) Rules,2014 provides that the criteria of offer or invitation to 200 persons in aggregate in financial year and minimum investment size of twenty thousand rupees of face value shall not be applicable to Non banking financial companies registered with the Reserve Bank of India and Housing Finance companies registered with the Housing Finance Companies registered with the National Housing Bank, if they are complying with the regulations made by RBI or NHB in respect of offer letter or invitation to be issued on private placement basis.
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