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Provisions, Procedure For Allotment Of Securities By Way Of Private Placement
Unlike the Companies Act, 1956, the Companies Act, 2013, stipulates stringent provisions for allotment of securities. These provisions have also been made applicable to Private Companies.
The provisions of Section 42 and rules made thereunder are to be complied in case of allotment of Securities by Private placement and the provisions of Section 62 and rules made thereunder are to be complied in case of further issue of Securities on Preferential basis.
The scope of Section 42 is vast, thereby any allotment even under Section 62, requires the compliance of provisions under Section 42.
The procedure and compliances required for issue of shares by way of Private Placement is as below:
- Identifying a party who is interested in investing in the Company.
- Convening of Board Meeting to consider issue of security to such party, approval of draft letter of offer, and fixing of time, place and venue for convening Extra-ordinary General Meeting [EGM] for obtaining the approval of the members by way of special resolution for the proposed issue to proposed party.
[Filing of Form MGT-14 with ROC, for the decision of the Board to issue shares [Filing pursuant to Sec. 179 (3) (c)].
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