{"id":83,"date":"2026-04-29T19:17:47","date_gmt":"2026-04-29T19:17:47","guid":{"rendered":"https:\/\/www.lexemer.com\/articles\/?p=83"},"modified":"2026-05-10T18:15:47","modified_gmt":"2026-05-10T18:15:47","slug":"private-placement-private-company","status":"publish","type":"post","link":"https:\/\/www.lexemer.com\/articles\/private-placement-private-company\/","title":{"rendered":"Private Placement under the Companies Act, 2013 by a Private Limited Company"},"content":{"rendered":"

Capital formation is a fundamental aspect of corporate operations. Under Indian company law, a company may raise share capital through three principal methods: public issue, rights issue and private placement. Public issues are subject to comprehensive disclosure, listing and SEBI regulatory requirements. In contrast, private placement offers a more confidential and efficient way for companies to raise capital from a select group of investors. The regulatory framework maintains the private nature of these transactions while ensuring the public offer regime is not circumvented.<\/p>\n

Private Placement by Private (Unlisted) Companies<\/p>\n

Applicable Laws:<\/strong><\/p>\n

Section 42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, as substituted by the 2018 amendment and updated up to the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025 (G.S.R. 131(E) dated 12 February 2025). SEBI regulations do not apply. Key provisions: Sections 23, 62(1)(c) and 117 of the Companies Act, 2013 and Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 (where it is also a preferential allotment).<\/p>\n

Private placement feature in brief:<\/strong><\/p>\n

    \n
  1. \n
      \n
    1. Offerees: maximum 200 persons per financial year, counted separately for equity, preference, and debentures, excluding QIBs and ESOP allottees.<\/li>\n
    2. Offer per tranche: cap of 50 persons under Section 42(2).<\/li>\n
    3. No renunciation: only the pre-identified, name recorded person (in form PAS 5) may apply and applications from others are void.<\/li>\n
    4. No advertisement: media, marketing, or any other form of solicitation is prohibited.<\/li>\n
    5. Payment: only through banking channels from the subscriber\u2019s own account and cash receipts is prohibited.<\/li>\n
    6. Allotment window: 60 days from receipt of application money. Refund must be made within 15 days thereafter, or 12% p.a. interest applies.<\/li>\n
    7. Utilisation bar: proceeds cannot be used until Form PAS-3 is filed with the ROC.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

      Step for Private Placement<\/strong><\/p>\n

        \n
      1. \n
          \n
        1. Board meeting to approve the issue, identify allottees and draft PAS-4;<\/li>\n
        2. Valuation report from a registered valuer (Section 247);<\/li>\n
        3. General meeting special resolution with the explanatory statement carrying Rule 14(1) disclosures;<\/li>\n
        4. File MGT-14 within 30 days;<\/li>\n
        5. Open a separate scheduled-bank account;<\/li>\n
        6. Despatch PAS-4 to each identified person within 30 days of recording the name;<\/li>\n
        7. Maintain PAS-5 record;<\/li>\n
        8. Allot within 60 days;<\/li>\n
        9. File PAS-3 within 15 days of allotment;<\/li>\n
        10. Issue certificates within 2 months and update the register of members within 7 days.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

          Note: When any allottee is a non-resident, the transaction must comply with the FEMA (Non-Debt Instruments) Rules, 2019 and the FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.<\/p>\n

          Rule 9B \u2014 Mandatory Dematerialisation<\/strong><\/p>\n

          Every private company (except small or producer companies) must issue securities only in dematerialised form and ensure all promoter, director, and KMP holdings are dematerialised before any further issue. The compliance deadline for private companies that were not small as of 31 March 2023 is extended to 30 June 2025 by the PAS Amendment Rules, 2025. Producer companies have five years from the close of the relevant financial year.<\/p>\n

          Penalties<\/strong><\/p>\n

          Under Section 42(10), penalty on the company, promoters and directors may extend to the amount raised or \u20b92 crore, whichever is lower. Money must be refunded within 30 days of the penalty order.<\/p>\n

          Lastly, For a private company, private placement is primarily a matter of compliance with the Companies Act, 2013, which now includes the additional requirement of dematerialisation under Rule 9B.<\/p>\n

           <\/p>\n","protected":false},"excerpt":{"rendered":"

          Capital formation is a fundamental aspect of corporate operations. Under Indian company law, a company may raise share capital through three principal methods: public issue, rights issue and private placement. Public issues are subject to comprehensive disclosure, listing and SEBI regulatory requirements. In contrast, private placement offers a more confidential and efficient way for companies […]<\/p>\n","protected":false},"author":1,"featured_media":86,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-83","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-companies-act-2013"],"_links":{"self":[{"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/posts\/83","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/comments?post=83"}],"version-history":[{"count":4,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/posts\/83\/revisions"}],"predecessor-version":[{"id":162,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/posts\/83\/revisions\/162"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/media\/86"}],"wp:attachment":[{"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/media?parent=83"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/categories?post=83"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lexemer.com\/articles\/wp-json\/wp\/v2\/tags?post=83"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}