Skip to content

CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities

Anand and Co Ltd, a private company, wants to allot shares to persons it chooses, through a private placement. Which of the following correctly states a feature of private placement under the Companies Act, 2013?

In a private placement, securities are offered only to identified persons by a private placement offer letter, and payment must come through banking channels from the subscriber's own bank account. It is not advertised to the public and does not need a full prospectus.

  1. AThe offer may be made to any number of persons through newspaper advertisements
  2. BAllotment must be made only to the persons identified and offered through a private placement offer letter, and payment must be received by cheque or electronic mode from the subscriber's own bank accountCorrect
  3. CShares may be allotted for cash received in physical currency notes
  4. DPrivate placement requires issuing a full prospectus with the Registrar

Explanation

A private placement is made to identified persons through a private placement offer letter in the prescribed form, and money must be received through banking channels from the bank account of the person subscribing. Option 1 would be a public offer, option 3 is not permitted, and option 4 confuses it with a public issue.

Did you get it right without looking?

One question tells you little. A timed set on Prospectus and Allotment of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Prospectus and Allotment of SecuritiesFree diagnostic mock

More Prospectus and Allotment of Securities questions