Analysis of Sub-sections of Section 143 of Companies Act 2013: Powers and Duties of Auditors and Auditing Standards Introduction Section 143 of the Companies Act 2013 is the section of the Indian companies law that pertains to the powers and duties of auditors and auditing standards in India.

1. Private Placement – Section 42 of Companies Act 2013 – Procedure & key points

2. This Article focus on Private Placement under section 42 of the Companies Act, 2013 and Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rules, 2014, it provides that a company can make a private placement to
a selected group of persons/ identified persons (or either to a person) or we can say company offering its
securities or inviting to subscribe its securities other than by way of a public issue through a private placement
offer letter up to 200 person (exclude QIB and employee of company under ESOP) in aggregate in a Financial year
for each kind of securities. However unless allotment with respect of one kind of security is completed, another
kind of security shall not be issued. HIGHLIGHTS All private placement offers should be made only to those
persons whose names are recorded by the company before sending the invitation to subscribe. The persons
whose names are recorded will receive the offer, and the company should maintain a complete record of the
offers in Form PAS-5. The Rules state that the company should offer or invite to subscribe its securities through a
private placement offer letter in Form PAS-4. A company should send a private placement offer letter
accompanied by an application form serially numbered and addressed either in writing or electronic mode,
specifically to the person to whom such an offer is made. The company should send the private placement offer
letter to the specific person within thirty days of recording the person’s name. In case of offer or invitation for
non-convertible debentures, it shall be sufficient if the company passes the Board Resolution each time if such
issue is within the borrowing limit specified under Section 180(1) (c) of the Companies Act. However, borrowing
limits are to be approved by the shareholders of the issuer company first.

3. PROCEDURE 1. Conduct a Board Meeting and pass Board Resolution to approve list of
identified person, draft offer letter for offer and issue of securities on preferential basis
through private placement; 2. Issue Notice with Explanatory Statement and conduct
EGM or AGM and pass Special Resolution to take approval of shareholder to approve
offer letter and issue securities on private placement basis and then file Form MGT-14
with Registrar of Companies within 30 days of date of General Meeting; 3. Call Board
meeting and pass Board Resolution for circulation of offer letter under private
Placement (skip this Meeting, if same is mentioned in 1Board meeting to circulate offer
letter subject to approval of shareholders);

4. 4. Received Subscription money within closing of open offer by any mode except cash; 5. After receiving
Subscription money, call a Board meeting and pass Board Resolution for allotment of securities to
that selected group of persons; 6. File return of allotment in the Form PAS-3 with Registrar of
Companies within 15 days of allotment; 7. Call Board Meeting and pass Board Resolution to issue
share certificates (skip this Board Meeting if it was mention at the time of allotment of securities);
8. Issue share certificates within 2 months from date of allotment. POINTS TO REMEMBER: 1. DSC
of the Director or Professional should be associate with V3 portal of M CA; 2. The value of the
private placement offer or invitation for each person should be of an investment size of Rs.20,000
of the face value of the securities. 3. Circulation of offer letter to identified person should be made
after filling Form MGT-14;

5. 4. Company shall maintain a complete record of private placement offers in Form PAS-5; 5. Company can
withdrawn its issue by giving notice to identified person before closing the open offer. 6. If company not
received any subscription money within offer period, the issue get automatically cancelled. 7. Subscription
money is received only from the account of identified person only within open offer; 8. Subscription
money shall be kept in a separate Bank account in a Scheduled Bank 9. Company can’t use the
subscription money until return of allotment is filled with Registrar of Companies; 10. Subscription money
should be used for business purpose only 11. Company shall make allotment within 60 days of receipt of
subscription money otherwise repay subscription money within 15 days from expiry of 60 days, if fails to
do so, repay it with interest @12% per annum calculated after 60 days 12. Form MGT-14 is not a STP form
for this purpose and Form PAS-3 is a STP 13. Any offer in non-compliance of provisions of Section 42 will be
deemed to be a public offer.

6. Attachments to Forms: M GT-14 1. Copy of Board Resolution for offer and issue of securities on preferential basis through private
placement; 2. Copy of Notice of EGM/ AGM with Explanatory Statement 3. Copy of Special Resolution 4. Consent of
Shareholders, if general meeting called at shorter notice. 1. Copy of Board Resolution for allotment of securities 2. Copy of
Valuation Report 3. List of allottees 4. a complete record of private placement offers and acceptances in Form PAS-5 is
required 5. Any additional information can be included as an optional attachment (s). √ If the company is a listed company
then, it should file the record of private placement offers along with the private placement offer letter with the Securities
and Exchange Board within thirty days of circulating the private placement offer letter. √ And if the identified person is a
listed company then the listed company give disclosure about the acquisition or agree to acquire the acquisition of securities
with the Securities and Exchange Board.

7. PENALTY FOR NON-COMPLIANCE OF PRIVATE PLACEMENT: A company, its directors and promoters will be liable for a penalty if
the company accepts monies or makes an offer in contravention of the Act and Rules. The penalty may extend to the
amount involved in the invitation or offer or Rs.2 crore, whichever is higher. The company should also refund all monies to
the subscribers within thirty days of the order imposing the penalty.
Tags: Companies Act, Companies Act 2013, private placement
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