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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Corporate and Economic Laws

Case: Kaveri Agro Foods Ltd, an unlisted public company, has paid-up capital of Rs 40 crore. Its Board wants to issue shares to a few identified investors by a private placement. Each offer will be made to named persons, and the total number of persons offered in a financial year is 180. Which statement is correct under the Companies Act, 2013 as it applies to this case?

The offer qualifies as a private placement because the Companies Act, 2013 permits offers to named persons up to 200 in a financial year, excluding qualified institutional buyers and ESOP employees. Since 180 persons are offered, the limit is not breached, so the issue is not a public offer.

  1. AThe offer is a private placement only if made to not more than 200 persons in a financial year, excluding qualified institutional buyers and employees under ESOPCorrect
  2. BThe offer is a private placement only if made to not more than 50 persons in a financial year
  3. CThe offer is a public offer because it exceeds 100 persons
  4. DPrivate placement can be made only to existing shareholders

Explanation

Private placement is an offer to a select group of persons, not exceeding 200 in a financial year (excluding QIBs and ESOP employees), made through a private placement offer letter, with payment from the bank account of the subscriber. 180 is within the limit. The 50-person figure is an old, wrong limit, and 100 is not the test.

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