Share allotment

[Nithya Gokul]

Dear members

any one tell me the difference between the preferential issue , private placement & rights issue.

[sandhya gharana]

Rights issue is when you have to give offer through Offer Letter fro subscription of Shares to each of the existing shareholder of the company on rights basis, in proportion to their existing shareholding. The shareholder to whom the offer is made can further renunciate its right in favour of anyone else. The Offer has to be open for 15- 30 days. The offer letter will include Application Form, which will be returned to the Company in case the offer is accepted or renunciated. No correspondence from the shareholder will be taken as decline of offer. The Company is required to file Form MGT- 14 for issuance of Shares and Form PAS-3 when allotment is made.

Preferential Issue and Private Placement are more or less same thing. Here, the Company offers to subscribe the Shares of the Company to particular person(s)

Its major points are:

1. Max. No. of people  to whom offer can be given: 200 in aggregate in a financial year

2. Conduct EGM and pass Special Resolution for the private placement/ preferential issue.

3. Offer of letter: Form PAS 4

4. Price of Shares have to be determined by Valuation Report of Registered Valuer, justification of which has to be given in explanatory statement (notice of EGM)

5. Value of offer shall be with an investment size of not less than Rs. 20000 of face value of securities 

6. Bank A/c is required as cash cannot  be accepted

7. Complete Record of the Person to whom offer is given is be maintained in Form PAS-5
8. PAS- 4 and PAS 5 has be filed within 30 days of circulation of offer.

9. Return of Allotment in Form PAS-3 with in 30 days of allotment

These were the major difference and requirements of Rights and Preferential/ Private Placement. For complete procedure, refer Section 42, 62 and Companies (Share Capital and Debentures) Rules, 2014 and Rule 14 of Cos. (Prospectus & Allotment of Securities) Rules, 2014

[Nithya Gokul]

Thanks Sandhya.

The criteria like less than 200 members,amt Rs.20,000/- and above comes under private placement.

Finally others can go ahead with preferential issue right.

Then what about the new share holders (in Private/Preferential allotment).

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