Private Placement Under Companies Act, 2013 Rules

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Section
42 
of the Companies Act,2013 and Rule 14 of Companies (Prospectus and Allotment of
Securities) rules ,2014
 deals with Private
Placement.
“Private placement” means
any offer of securities or invitation to subscribe
securities to a select group of persons by a
company (other than by way of public offer) through issue of a private
placement offer letter and which satisfies the
conditions specified in this section.


 Conditions:
1. The offer or invitation
for subscription of securities is to a select group of persons.
2. The offer or invitation
is other than by way of public offer.
3. The offer or invitation
is through issue of a Private Placement letter.
4. The proposed offer of
securities or invitation to subscribe securities has been previously approved
by the shareholders of the company, by a Special Resolution, for each of the
Offers or Invitations. In the explanatory statement annexed to the notice for
the general meeting the basis or justification for the price (including
premium, if any) at which the offer or invitation is being made shall be
disclosed
5. The offer of securities
or invitation to subscribe securities, shall be made to such number of persons not exceeding 50 or shall
be made to not more than 200
persons in the aggregate in a financial year.
 [excluding
QIBs and employees of the company being offered securities under a scheme of
employees stock option as per provisions of clause
(b) of sub-section (1) of section 62]
6. The value of such offer
or invitation per person shall be with an investment size of not less than Rs.20,000/- of face
value of the securities.
7. The payment to be made for subscription to securities
shall be made from the bank account of the person subscribing to such
securities and the company shall keep the record of the Bank account from where
such payments for subscriptions have been received.
8. No fresh offer or
invitation under this section 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invitation has been withdrawn or abandoned by the company.
9. All monies payable
towards subscription of securities under this section shall be paid through
cheque or demand draft or other banking channels but not by cash.
10. A company making an
offer or invitation under this section shall allot its securities within 60 days from the
date of receipt of the application money for such securities and 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
date of completion of 60 days and if the
company fails
 to repay the
application money within the aforesaid period, it shall be liable to repay that money with interest
at the rate of 12%. p.a
. from the expiry of the 60th day.
11. Monies received on
application shall be kept in as separate bank account in a scheduled bank and
shall not be utilised for any purpose other than—
(a) for adjustment against allotment of
securities; or
(b) for the repayment of monies where the company
is unable to allot securities.
12. No company offering
securities under this section shall release any public advertisements or
utilise any media, marketing or distribution channels or agents to inform the
public at large about such an offer.
Form and
Manner of Private Placement:
A company may make an offer
or invitation to subscribe to securities through issue of a private placement
offer letter in Form PAS-4.
A private placement offer
letter shall be accompanied by an application form serially numbered and
addressed specifically to the person to whom the offer is made and shall be
sent to him, either in writing or in electronic mode, within thirty days of
recording the names of such
persons.
No person other than the
person so addressed in the application form shall be allowed to apply through
such application form and any application not conforming to this condition
shall be treated as invalid.
Record of
Private Placement:
The Company shall maintain
a complete record of Private placement in Form
PAS-5.
Filing of
Private Placement offer Letter:
A copy of record along with
the private placement offer letter in Form PAS-4 shall be
filed with the Registrar with fee as provided in Companies (Registration
Offices and Fees) Rules, 2014 and where the company is listed, with the
Securities and Exchange Board within a period of 30days of
circulation of the private placement offer letter.
The date
of private placement offer letter shall be deemed to be the date of circulation
of private placement offer letter.
Filing of
Return of Allotment of Securities:
A return of allotment of
securities shall be filed with the Registrar within
30 days
 of allotment in Form PAS-3 and with
the fee as provided in the Companies (Registration Offices and
Fees) Rules, 2014
 along
with a complete list of all security holders
containing-
(i) the full name, address,
Permanent Account Number and E-mail ID of such security holder;
(ii) the class of security
held;
(iii) the date of allotment
of security ;
(iv) 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.
Exempted
Companies (in terms of Offer & Value of securities):
1. NBFCs which are
registered with the Reserve Bank of India under Reserve Bank of India Act,
1934; and
2. HFCs which are
registered with the National Housing Bank under National Housing Bank Act,
1987, if they are complying with regulations made by Reserve Bank of India or
National Housing Bank in respect of offer or invitation to be issued on private
placement basis.
Penalty:
If a company makes an offer
or accepts monies in contravention of this section,
The company, its promoters
and directors shall be liable for a penalty which may extend to the amount involved in the offer or invitation or
Rs.2 Crores, whichever is higher
, and
The company shall also refund all monies to
subscribers within a period of
30 days
 of the order imposing the penalty.
Points to
noted:
·   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
·   If a company, listed or unlisted, makes an offer to
allot or invites subscription, or allots, or enters into an agreement to allot,
securities to more than the prescribed number of persons, whether the payment
for the securities has been received or not or whether the company intends to
list its securities or not on any recognised stock exchange in or outside
India, the same shall be deemed to be an offer to the public and shall
accordingly be governed by the provisions of Public offer.

·   Any offer or invitation not in compliance with the
provisions of this section shall be treated as a public offer and all
provisions of this Act, and the Securities Contracts (Regulation)Act, 1956 and
the Securities and Exchange Board of India Act, 1992 shall be required to be
complied with.
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