.

1. PRIVATE PLACEMENT
•
PRIVATE PLACEMENT (PP) UNDER
COMPANIES ACT, 2013
• I NTROD UCTI ON :
• WE ALL KNOW COMPANIE S ACT,
2013 PROVIDE S VARIOUS OPTIONS TO
ISSUE SECURITIE S (SHARE S,
DE BE NTURES OR ANY OTHE R T YPE OF
SECURITIE S). ONE OF THE SE OPTIONS IS
PRIVATE PL ACE ME NT. THE DE FINITION
OF PRIVATE PL ACE ME NT E XPL AINS
WHE N THE COMPANIE S HAVE TO
FOLLOW THE PROVISIONS. LE T ’ S LOOK
INTO THE DE FINITION AND THE
PROVISIONS .

2. DEFINITION OF PRIVATE
PLACEMENT
PROCEDURE UNDER
COMPANIES ACT, 2013:
• Explanation -I to Section 42(3) defines the
Private Placement;
• “Private Placement” means any offer or
invitation to subscribe or issue of
securities to a select group of persons by a
company (other than by way of public
offer) through private placement offer-
cum-application, which satisfies the
conditions specified in this section.
• Let us split the definition and make it easy
to understand
• Private Placement is:
• – any offer or invitation by a company
• – to subscribe or issue of securities
• – to a select group of persons,
• – other than by way of public offer,
•

3. LIST OF SECTIONS AND RULES
APPLICABLE TO PRIVATE
PLACEMENT:
Before go to the Provisions of Private Placement, it is apt to
make the list of Sections and Rules which are applicable while
issuing securities under Private Placement. Below is the list:
Section 42 of the Companies Act, 2013
Rule 14 of the Companies (Prospectus and Allotment of
Securities) Rules, 2014

4. Provisions:
Now we understood what is the definition, but what are the provisions to be followed while issuing
securities under Private placement (PP)?
i. To whom securities can be issued under PP?
The securities under PP can be issued /offered only to a
select group of persons who have been identified by the
Board.
ii. Private Placement offer can be given to how may
persons?
The offer of securities or invitation to subscribe securities, shall
be made to not more than 50 persons in a single offer or not more
than 200 persons in the aggregate in a financial year (excluding
qualified institutional buyers and employees of the company
being offered securities under ESOP). This restriction would be
read for all the securities combined together in a Financial Year.

5. 3) Is there any prescribed format for Offer Letter?
* The PP offer letter shall be in form of PAS-4 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 name of such person.
4) Is there any minimum Offer size per person?
* Earlier there was a requirement of minimum offer size of Rs. 20,000
face value of the Security. However the same was dispensed off by
Companies (Prospectus and Allotment of Securities) Second
Amendment Rules, 2018 with effect from 7th August, 2018. So there is
no minimum offer size for Private Placement.

6. STEP BY STEP PROCEDURE FOR PRIVATE
PLACEMENT
1. Hold Board Meeting 2. Hold General Meeting 3. File form MGT-14
•To approve the list of
identified persons
•To approve the draft
offer letter
•To call GM
•To pass special resolution
approving PP and approving
offer letter
•File the Special Resolution in
Form MGT-14 within 30 days
from the date of EGM

7. • 4. Circulate the Offer Letter (PAS-4)
 PAS-4 to be circulated to the identified
persons
It can be circulated only after filing
MGT-15
• 5. Receive the
Application money
• The Application money to be
received and kept in a Separate Bank
to be done within 60 days from the
date of receipt of Application Mone
• 6. Allotment
• Allotment to be done within 60 days
from the date of receipt of Application

8. 7. File Return of Allotment
 The Return of Allotment in Form
PAS-3 to be filed within 15 days
from the date of allotment
8. Utilization of amount
 The amount can be utilise only
after filing PAS-3
9. Other incidental matters
 Issue of Share Certificates within 2
months from the date of allotment
 Updating the Register of Members