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CS Executive · Capital Market and Securities Laws · Issue and Listing of Non-Convertible Securities

Kaveri Textiles Ltd, an unlisted private company, wants to raise money by issuing non-convertible debentures. Under section 23 of the Companies Act, 2013, which route is open to it among the following?

Private placement under Part II of the Chapter is the route open. Section 23(2) limits a private company to rights or bonus issues or private placement, while public offers through a prospectus are available only to public companies under section 23(1).

  1. APublic offer through a prospectus
  2. BPrivate placement complying with Part II of the ChapterCorrect
  3. COffer for sale to the public by an existing shareholder
  4. DListing on a permitted stock exchange in a foreign jurisdiction

Explanation

Section 23(2) allows a private company to issue securities only by rights issue or bonus issue, or through private placement under Part II of the Chapter. Public offer through a prospectus is available to a public company under section 23(1)(a), so option A is wrong for Kaveri.

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