BBNC

Private Placement


A private placement is a type of capital raising event in which securities are sold to a small group of investors. It differs from a public offering, in which securities are made available to any sort of investor on the open market.
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Overview

A company may issue financial securities, such as shares and convertible securities, to a group of few investors. Section 42 of the Companies Act of 2013 governs private placements.

In a financial year, the maximum number of people to whom securities can be allotted through private placement is 200 (excluding Qualified Institutional Buyers and employees who have been allocated stocks under the ESOP Scheme). If the amount exceeds the prescribed limit, it will be considered a public offering, and the Company will be required to complete the public offering procedure.

The following points needs to be kept in mind while offering securities through private placement:
  1. Except for cash, the application money must be received via cheque, demand draught, or other financial methods.
  2. The minimum application size per individual must not be less than Rupees 20,000.
  3. The Company will not do a Private Placement unless any earlier offer or invitation has been completed, withdrawn, or abandoned.
  4. The Company shall not make any public announcements/advertise about the Private Placement.
  5. If a Company violates the requirements of this Section, the Company, its Promoters, and its Directors may be subject to a penalty of up to the amount involved in the violation or Rs. two crores, whichever is higher. Furthermore, within 30 days of the purchase, the Company must reimburse all money to subscribers.
  6. Each kind of security issue has a limit of 200 subscribers.



Benefits of Private Placement

Long Term

Private placements offer fixed-interest funding with longer maturities than traditional bank borrowing. This is good for when a company is provided with a growth opportunity that will not yield a quick return on investment.

Longer Refund

A company would have more time to repay the private placement while also knowing the cost of borrowing for the duration of the investment.

Long term relationship

Because private placements are generally "buy-and-hold" transactions, the firm would benefit from maintaining a long-term relationship with the same investor during the funding period.

Speed in Execution

The private placement market promotes an atmosphere in which an investment may be completed quickly, usually within 6-8 weeks compared to other issue of securities.

Checklist/Requirements

  1. Corporate Identification Number (CIN) /name of the Company
  2. Valid DSC (Digital signature Certificate) of Existing Director of the Company
  3. Type of Security to be issued new investor (Equity / Preference / Debenture)
  4. Whether the investor is existing shareholder or new investor in the company
  5. Proposed investment size
  6. % Of shares / No. of Shares to be issued to new investor
  7. Investors Name, Address, Occupation and Nationality
  8. Debt Structure of the company
  9. Copy of PAN of all investors
  10. Valuation Report
  11. Bank Statement (After receipt of investment amount)

Process of Private Placement

Step 1: Raise a request with us, discussion with BBNC team
Step 2: Client to share the information/documents required
Step 3: Convene and hold Meeting and pass Resolution
Step 4: BBNC to share documents with client
Step 5: BBNC to file MGT-14
Step 6: Company to issue PAS-4 to proposed investor
Step 7: Company to receive investment amount in companies separate bank account
Step 8: BBNC to file PAS-3
Step 9: BBNC to Pay Stamp Duty on Share Certificate
Step 10: BBNC to issue share certificate

Key Deliverables

  1. Resolution and other relevant documents relating to allotment of security
  2. Filed e-Forms and Challans
  3. Share Certificates
  4. Valuation Report

Private Placement

Why Choose Us

  Entrepreneur Friendly

We make the process so easy and fast that you will not even feel the headache of all the paperwork, and our professionals will provide you all the promised deliverable within a given span of time.

  Experienced Professionals

All our professionals are qualified and specialized in that particular work. Making sure no mistakes are done at the time of filings with the authorities so that company won’t have to pay any penalties due to mistakes.

  One Stop for All Your Requirements

We support you throughout the journey of your business, from the incorporation, Accounting and taxation support, Secretarial compliance support, and Legal support.

  Cost-Effective

We believe that cost plays a vital role in any company’s growth stage, that’s why we do not surprise our clients with hidden charges, you pay what you see in the initial proposal.


Frequently Asked Questions


Can private placement be made to existing shareholders?
No, it is made only to outsiders
No, both are different
A public company or private company can issue shares on private placement basis.
Allotment must be made within 60 days. If not made within 60 days, amount should be refunded within 15 days. Otherwise, interest @ 12% will be payable. The money shall be kept in a separate bank account, either for allotment or for repayment.

The offer shall be made to specific persons by name and complete information and record of such offer shall be filed with ROC within 30 days of circulation of private placement offer.
The value of such offer or invitation per person shall be with an investment size of not less than Rs 20,000 of face value of the securities. This restriction does not apply to issues by NBFC registered with RBI and housing finance companies registered with NHB (National Housing Bank). If RBI or NHB has not specified similar regulation, the provision of Companies Act shall apply.