TAKE A NOTE ON CFSS AND LLPSS
When your client is having any pending compliance for sake of huge penalty, you can advice them to complete it within CFSS and LLPSS now. Along with AOC-4, MGT-7, Form 3, 4, 8, 11 LLP, there are 76 forms allowed to get filed without any penalties. For more clarification on these schemes, check into MCA’s FAQ section.
In this edition, we will be seeing about Private Placement. Considering the length of the article and the tremendous notifications at the emergency situation, our usual Legal Terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST follows the article.
CS Saranya Deivasigamani,
CEO
Private Placement
When the Board of Directors decide to issue shares to a selective group of individuals or company or both, they can opt to issue the shares through Private Placement.
Section 42 of the Companies Act, 2013 provides the guidelines related to Offer or Invitation for Subscription of Securities on Private Placement.
Eligibility and Limitations
Any company can make private placement be it a listed or unlisted.
The offer shall be made to the selective group of persons (“identified persons”) who shall not exceed 50 or such higher numbers as shall be prescribed [excluding the QIBs and employees of the company being offered securities under a ESOP.]
If the company makes an offer more than the prescribed number of persons,, whether the payment for the securities has been received or not or whether the company intends to list its securities or not on any recognised stock exchange in or outside India, the same shall be deemed to be an offer to the public and shall accordingly be governed by the provisions of Part I of Chapter III of the Companies Act, 2013.
Private Placement Offer
When the Board decides to make a Private Placement, it shall prepare private placement offer and application that does not carry any right of renunciation. The Board has to collect such forms in such manner as may be prescribed to the identified persons. The Board has to maintain proper records of the names and addresses of the identified persons.
Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person along with subscription money paid either by cheque or demand draft or other banking channel and not by cash. The company shall not utilise such monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar in accordance with sub-section (8).
Fresh Offer
The company cannot make any fresh offer or invitation to fresh private placement offer unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company, subject to the maximum number of identified persons under sub-section (2), a company may, at any time, make more than one issue of securities to such class of identified persons as may be prescribed.
Allotment
A private placement offer should be allotted within 60 days from the date of receipt of application money for such securities.
If the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within 15 days from the expiry of 60 days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of 12% per annum from the expiry of the 60th day.
The application money shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—
(a) for adjustment against allotment of securities; or
(b) for the repayment of monies where the company is unable to allot securities.
No Public Notice
The company shall not release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about the private placement issue.
ROC Filing
As like any allotment, the company shall file with the Registrar a return of allotment in PAS-3 but within 15 days from the date of the allotment including a complete list of all allottees, with their full names, addresses, number of securities allotted and such other relevant information as may be prescribed. If a company defaults in filing the return of allotment within the prescribed period, the company, its promoters and directors shall be liable to a penalty for each default of one thousand rupees for each day during which such default continues but not exceeding twenty-five lakh rupees.
Defaults
If a company violates or make any private placement that is not in compliance of any of the provisions mentioned in Section 42 of the Companies Act, 2013, the offer shall be deemed to be a public offer and all the provisions of the Companies Act, 2013 and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 shall be applicable.
If a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest to subscribers within a period of 30 days of the order imposing the penalty.
Legal Term
Comperuit ad diem
A plea in an action of debt on a bail bond that the defendant appeared at the day required.
MCA Updates
- Companies (Meetings of Board and its Powers) Amendment Rules, 2020.
- Nidhi Company Compliance.
- Clarification on spending of CSR funds for COVID-19.
- CARO 2020 dated 24.03.2020.
- Special Measures under Companies Act, 2013 (CA-2013) and Limited Liability Partnership Act, 2008 in view of COVID-19 outbreak.
- Circular for engagement of Chartered Accountants in NFRA on Contractual basis.
- Clarification on contribution to PM CARES Fund as eligible CSR activity under item no. (viii) of the Schedule VII of Companies Act,2013.
- Functioning of NCLT during the lock down period.
- Ordinary and Special Resolution.
- FAQ on CSR.
- IEPF.
- Valuation Bill.
SEBI Updates
- LODR.
- LODR Cont.
- Encumberance of Infrastructure Investment Trust.
- Encumberance of Real Estate Investment Trust.
- Interoperability among clearing corporation.
- SAST.
- CRA.
- Mutual Funds.
- FPI.
- FPI Cont.
- AIFS and VCFS.
- Covid-19
RBI Updates
- Large Exposure Framework.
- Small Finance Bank Private Sector.
- FPI Investment Limit.
- SLBC / UTLBC.
- FEMA.
- Export of Goods and Services.
- Hedging.
- FPI and MTF.
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