Private placement of shares by private company
Private placement of shares by private company
The most frequent mode that company issue its shares is private placement of shares. As per section 42, private placement means the issue of shares to a particular group of person through private placement letter.
Under private placement, company offers its shares through private placement letter to a selected group of person.
Basic requirements for the private placement of shares?
Company intending to raise funds through private placement of shares should comply with the following conditions.
- Check authorisation in Article of Association.
- Separate bank account is required to receive money
- Each Proposed person should subscribe for minimum value of 20,000.
- Offer made can not exceed 50 person.
- Shares should be allotted within 60 days of application money received.
- Company can not advertise for the private placement.
The above are the basic condition that you should clear with. Let's discuss the proceuders at glance to issue shares through private placement letter.
1. Hold board meeting
- Decide date of holding GM/EGM.
- Prepare notice for EGM/GM
2. Prepare list of Allottee in specified format "PAS-5"
3. Hold members' meeting.(GM/EGM)
Pass member' resolution authorising the issue of shares
4. Receive consideration for issue of shares.
5. Hold board meeting to allot shares
6. File PAS-3 and MGT-14
7. Issue share certificate to subscribers.
Hope this helps you.
