Issue Shares through Private Placement

What is Private Placement of Shares?

Private Placement is made only to a selected group of persons who are identified by the Board of Directors of the Company. The Private Placement offer can be made to a minimum number of 50 persons and a maximum number as prescribed.?The limit on the number of persons is on Qualified Institutional Buyers (QIB) and Employees under Employee Stock Option Scheme.?The shares allotted through Private Placement should issue their shares within 60 days from the receipt of the application money against such shares.

·?What is the Procedure for Issue of Shares through Private Placement?

The procedures prescribed for Issue of Shares through Private Placement is as follows:

??Call for Board Meeting

A notice should be issued?at least 7 days prior?of the date of Board Meeting. The agenda of the Board Meeting should be attached in the notice.

??Hold Board Meeting

The following things should be checked in the Board Meeting:

• The quorum of the Board.
• To identify the persons to whom Private Placement Offer is made.
• Prepare Private Placement offer under?the Form PAS-4.
• A Board Resolution should be passed for the approval of Private Placement Offer.
• Issue notice of General Meeting at least 21 days before the date of General Meeting as per?Section 101 of Companies Act, 2013.
• The notice shall include the time, place, date and day of the General Meeting.
• The notice of the General meeting should include the statement of the business.
• The notice can be sent in writing or through electronic mode.

??File Form MGT-14

After the passing of Board Resolution file?Form MGT-14?with the Registrar of Companies (RoC).?The Form should be filed within 30 days of passing of the Board Resolution.??

??Hold General Meeting

In General Meeting check for the quorum of the Meeting. Then pass the offer letter in Form?PAS-4 for approval before the members of the Company. After the approval by the members, a Resolution is passed for Issues of Shares through Private Placement.?

???File form MGT-14

After passing of Special Resolution file Form MGT-14 with the Registrar of Companies (RoC).?The Form should be filed within 30 days of passing of the Special Resolution.?

??Circulation of Offer Letter

Send the application letter to the person identified in?PAS-4?by the members of the Board. The application letter should be sent within 30 days from recording names of the persons identified.

??Open a Separate Bank Account

The money will be received in a separate bank opened for the Private Placements only. The funds should be received in the bank account within the period specified in the offer period.

??Hold Second Board Meeting

After the offer period is closed, hold a Board Meeting for Resolution for Allotment of Shares through Private Placement.

??File Form PAS-3

The return of Allotment Form in?PAS-3?will be filed within 15 days of passing the Board Resolution for the Allotment of Shares.???????????????????????????????????

??Issue Certificate of Shares

After filing of all the required forms with the RoC, the share certificate is issued to the shareholders. After issuing of Share Certificate, the stamp duty should be paid by the Company within 30 days of Issue of Share Certificate.

The record of Private Placement is maintained in Form PAS-5. The Register of members should be updated after the completion of Allotment of Shares.

What are the Conditions for Issue of Shares through Private Placement?

There are certain conditions mentioned under Section 42 of Companies Act, 2013, which should be followed for Issue of Shares through Private Placement:

• The money received on the application should be kept in a separate bank account and should not be used for any purpose other than:
• For modification against Allotment of securities
• For the settlement of money where the Company is not capable of allotting securities.
• Allotment of Shares if not done within 60 days of the receipt of the application form, then the application money is to be repaid in 15 days.?The Company if not repays the money after 15 days period mentioned above; the money with interest @?12% per annum is to be paid by the Company from the 60th?day of the expiry of 15 days period as mentioned earlier.
• No public advertisement or utilization of media, marketing channels or distribution channels or agents should be used to inform the public at large about the Private offer.
• Any offer in non-compliance of provisions of Section 42 will be deemed to be a public offer.
• The money should be paid through Demand Draft (DD), or cheque, or any other banking channels but not in cash.
• The Company can make no fresh allotment unless the earlier Allotment of Shares has been completed, withdrawn or abandoned by the Company.
• The Allotment can only be done to the persons prescribed by the Board of Members of Company.?

What are the Documents required for the Issue of Shares through Private Placement?

The documents required for the Issue of Shares through Private Placement are as follows:

• Valuation Report as on date of Allotment by a CS/CA/CMS in practice or SEBI registered Merchant Banker.
• Copy of outcome of Board Meeting.
• A true certified copy of Resolution passed by Members of Company.
• An Explanatory Statement of Resolution by members of Company.
• An approved offer letter of Private Placement.
• Form PAS-5 with a detailed list of Allottees.