Corporate law,Private limited company,Shares
Private Placement-Conditions & Checklist
27 Apr 2016  |  Views: 50  | 
Rashi Gahlaut
Advocate

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 following conditions-

Conditions:

1. Issue shall be authorised by the Articles of Association and by a Special Resolution

2. The securities shall be made fully paid up at the time of their allotment BY PUBLIC AND PRIVATE COMPANIES Sec. 62(1) (c) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Sec. 42 read with Rule 14 of companies (Prospectus and Allotment of Securities) Rules, 2014

3. In case of Non-Convertible Debentures, it shall be sufficient if the company passes a previous Special Resolution once in a year for all the offers for such debentures during the year

4. Private Placement Offer Letter : shall sent in Form PAS-4, serially numbered application form to the subscribers, either in writing or in electronic mode within 30 days of recording of their names in the “Record of Private Placement Offer” kept by the company in prescribed form PAS-5

5. Offer or Invitation: shall be made to not more than 200 Persons in the aggregate in a Financial Year (and not more than 50 people per offer) in a financial year excluding a) Qualified Institutional Buyers (QIB’s) and b) Employees under stock option scheme and would be calculated individually for each kind of security.

6. No fresh offer shall be made before completion of earlier offers made or withdrawn

7. Investment size per person shall be not less than Rs. 20,000 of “Face Value” of the securities.

8. The Explanatory statement shall contain disclosures as mentioned in the rules.

9. The price may be either for cash or for consideration other than cash, shall be determined on the basis of Valuation Report BY PUBLIC AND PRIVATE COMPANIES Sec. 62(1) (c) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Sec. 42 read with Rule 14 of companies (Prospectus and Allotment of Securities) Rules, 2014

10. If convertible securities are offered with an option to get equity shares, the price of the shares shall be determined before hand on the basis of valuation report

11. The Non-cash consideration shall be valued by a registered valuer who shall submit a valuation report to the company giving justification for the valuation

12. Non-cash consideration shall be treated in the books of accounts in the following manner: a) If it is in the form of Depreciable Asset, it shall be carried to the Balance Sheet as per Accounting Standard b) If it is in the form of Non-Depreciable Asset, it shall be expensed as provided in the Accounting Standard

13. Payment shall be through bank channels only: No cash Transactions shall be allowed and received amount shall be kept in a separate bank account.

14. Allotment: shall be made within 60 days from the date of receipt of application money. BY PUBLIC AND PRIVATE COMPANIES Sec. 62(1) (c) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Sec. 42 read with Rule 14 of companies (Prospectus and Allotment of Securities) Rules, 2014

15. If not allotted within 60 days, company shall repay the application money to subscribers within 15 days from the date of completion of 60 days. If it is failed, it shall be liable to repay the money with interest of 12% after expiry of 60 days.

16. Private Placement Offer Letter in PAS-4 and Record of Private Placement in PAS-5 shall be filed with ROC in form GNL-2 17. A Return of Allotment shall be filed in PAS-3 within 30 days of allotment

 

Check list for Secretarial Audit:

1. Prepare list of persons to whom offer may be made (not exceeding 200 in a financial year for each kind of security)

2. Ensure that no allotment against any previous offer/invitation of any kind of security is pending

3. Issue to be authorised by AOA

4. Pass special resolution for such issue.

5. Explanatory statement to contain justification for price and premium.

6. Determine issue price by valuation report

7. The issue price not to be less than the price determined on the basis of valuation report

8. Only fully paid securities can be issued

9. Issue an offer letter in Form No. PAS-4

10. Requirements of Offer Letter:

a. To be accompanied by serially numbered application form

b. Addressed specifically to the person to whom offer is being made

c. Sent to only such person in writing/electronically

d. Within 30 days of recording names in the list

e. No person other than the addressee allowed to apply through application form

f. Value of offer/invitation per person not less than Rs. 20,000 of face value of the security

g. To also comply with requirement of contents of notice about renunciation etc.

11. Maintain record of offer letters in Form No. PAS-5

12. File offer letter with ROC along with offer letters with 30 days of circulation of offer letter

13. Amount to be received only by cheque /DD/ other banking channels but not by cash – only from the bank account of the subscriber. BY PUBLIC AND PRIVATE COMPANIES Sec. 62(1) (c) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Sec. 42 read with Rule 14 of companies (Prospectus and Allotment of Securities) Rules, 2014 bank account of the subscriber.

14. Company to maintain record of the bank account from which payments received

15. In case of joint holders, payment was received from first applicant only.

16. Within 12 months from the date of passing special resolution allotment should be completed if not another resolution was passed to complete allotment

17. Where convertible securities are offered, price of resultant shares shall be determined beforehand on basis of valuation report.

18. Board resolution to specifically contain authority for issuance of share certificates to 2 directors and CS/one authorised person. One of the two directors should be director other than MD/WTD.

19. Share application money was kept in separate bank account and was utilized only for

• Adjustment against allotment or

• Repayment

20. Return of allotment in Form No. PAS-3 within 30 days

21. Share certificates to be issued within 2 months of allotment of shares / 6 months of allotment of debentures

22. Entry in Register of Members

23. In case of consideration other than cash, accounting treatment as specified in Rules, was complied 24. In case a charge is required to be created in connection with the issue of the securities, check if the same has been done in-accordance with the provisions of the Act and other applicable legal requirements and prescribed returns have been filed.

 

Indicative list of documents to be checked:

1. Minutes of Board Meeting

2. Special Resolution with Explanatory Statement and minutes thereof

3. AOA

4. Valuation Report

5. Copy of offer letter

6. Record of Bank Account from where payments for subscription have been received

7. Board Resolution giving authority to sign the share certificates

8. Register of members

9. Boards Report

10. PAS-3, PAS-4, PAS-5, SH-6, MGT-14

The Special Resolution passed by the shareholder of the company is valid for a period of 15 days from the date of passing of Special Resolution within which the allotment should be completed.

 

File return of allotment with Registrar –

A return of allotment of securities under section 42 shall be filed with the Registrar in Form No.PAS-3 with necessary fees along with a complete list of all security holders containing-

(i) Full name, address, PAN, and E-mail id of such security holders;

ii) Class of security held;

(iii) Date of becoming security holder;

(iv) Number of securities held; nominal value and amount paid up on such securities; and particulars of consideration received.

  Issue share certificates and update minutes book and registers.

Attachments with PAS-3

  • List of Allotees; attach a separate list for each allotment. If not attached, then it shall be submitted separately in a CD
  • Copy of Board or Shareholder’s agreement
  • Valuation Report from the valuer, if any
  • Copy of contract where securities have been allotted for consideration other than cash or attachment wherein the details of contract reduced in writing by the company; if any
  • Copy of the special resolution authorizing the issue of bonus shares
  • Complete record of private placement offers and acceptances in Form PAS-5.
  • Optional attachment, if any

 

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