MCA SUBSTITUTED THE SECTION 42 AND RULES FOR PRIVATE PLACEMENT
Companies (Prospectus and Allotment of Securities) Second Amendment Rules, dated 07.08.2018
Major changes in provisions for Private Placement and rules are as follows:
APPROVAL FROM SHAREHOLDERS BY SPECIAL RESOLUTION
(1) For the purposes of sub-section (2) and sub-section (3) of section 42, a company shall not make an offer or invitation to subscribe to securities through private placement unless the proposal has been previously approved by the shareholders of the company, by a special resolution for each of the offers or invitations:
Provided that in the explanatory statement annexed to the notice for shareholders’ approval, the following disclosure shall be made:-
CONTENTS OF THE EXPLANATORY STATEMENT
(a) particulars of the offer including date of passrng of Board resolution
(b) kinds of securities offered and the price at which security is being offered
(c) basis or justification for the price (including premium, if any) at which the offer or invitation is being made;
(d) name and address of valuer who performed valuation;
(e) amount which the company intends to raise by way of such securities;
(f) material terms of raising such securities, proposed time schedule, purposes or objects of offer, contribution being made by the promoters or directors either as part of the offer or separately in furthrance of objects; principle terms of assets charged as securities:
An Offer should not be more than 200 persons in a financial year.
An offer or invitation to subscribe securities under private placement shall not be made to persons more than two hundred in the aggregate in a financial year:
FIRST TO IDENTIFY THE PERSONS:
The persons to whom the private placement is to be made shall be first identified by Board.
UTILIZATION OF MONEY
As per new provision, money raised through Private placement can not be utilized unless allotment is made and return of allotment is filed with ROC.
RETURN OF ALLOTMENT TO BE FILED IN 15 DAYS
Return of Allotment (Form PAS-3) shall be filed within 15 days from the date of allotment (earlier, it was 30 days).
ISSUE OF NON-CONVERTIBLE DEBENTURES:
Private placement for non-convertible debentures can be made by board resolution, if such offer amount is not exceeding the limit specified in Section 180(1)(c) of Companies Act, 2013.
ISSUE OF PRIVATE PLACEMENT OFFER LETTER
The Private Placement offer-cum-application letter shall be filed only after the relevant special resolution or board resolution shall be filed with ROC in Form MGT-14.
INTRODUCTION OF NEW FORM PAS-4
Form PAS-4 is replaced in the new rules.
Private placement offer cum application letter shall be in the form an application in Form PAS-4 serially numbered and addressed specificallv 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 pursuant to sub-section (3) of section 42:
INTRODUCTION OF NEW FORM PAS-5
The company shall maintain a complete record of private placement offers in Form PAS-S.
NON-APPLICABILITY OF THIS PROVISIONS
(a) non-banking financial companies which are registered with the Reserve Bank of India under the Reserve Bank of India Act,-1934 (2 of 1934); and
(b) housing Finance companies which are registered with the National Housing Bank under the National Housing Bank Act, 1987 (53 of 1987),
If they are complying with regulations made by the Reserve Bank of India or the National Housing Bank in respect of offer or invitation to be issued on private placement basis: Provided that such companies shall comply with sub-rule (2) in case the Reserve Bank of India or the National Housing Bank have not specified similar regulations.