Difference between Private Placement and Preferential Allotment of Shares

Sl. No. Type of Difference Private Placement Preferential Allotment

 

1. Section Section 42 of the Companies Act, 2013 Section 62(1)(C) of the Companies Act, 2013
2. Rule Rule 14 of the Companies (Prospectus and Allotment of Shares) Rules, 2014 Rule 13 of the Companies (Issue of Share Capital and Debentures) Rules, 2014
3. Issue of Shares / Securities “securities” include—

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable

securities of a like nature in or of any incorporated company or other body

corporate;

“shares or other securities” means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.
4. Offer Letter Private Placement Offer letter in prescribed form “PAS 4) No prescribed format. However, the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined.
5. Limit on the number of person to whom offer will be given A private placement shall be made only to a select group of persons who have been identified by the Board, whose number shall not exceed fifty [excluding the QIB and Employees under a scheme of ESOP], in a financial year subject to such conditions as may be prescribed. Same as applicable in Private Placement
6. Application Money / Consideration Payment through Cheque, Demand Draft or other banking channels but not by Cash Consideration can be for Cash or for a consideration other than Cash
7. Separate Bank Account Required Not specifically required
8. Valuation Report Not required Required
9. Authorisation in Articles No authorisation in AOA is required Authorisation is AOA is required
10. Special Resolution Prior Special Resolution is required Prior Special Resolution is required
11. Allotment time Within 60 days of receipt of Application money Allotment shall be completed within a period of 12 months from the date of passing special resolution
12. Right of renunciation Private placement offer and application shall not carry any right of renunciation. No such restriction
13. Restriction on fresh offer No fresh offer or invitation shall be made unless the allotments for earlier offer or invitation have been completed. No such restriction
14. Filing of documents with ROC etc. Offer letter in prescribed Form PAS-4 and eForm PAS-3 to be filed with ROC.

 

Record of Private Placement Offer to be maintained by the Company in prescribed Form PAS-5.

eForm PAS-3 (return of allotment) to be filed with ROC.

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