Skip to content

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

Meghdoot Power Ltd, an unlisted company, made a private placement offer of debentures to more than the prescribed number of persons in a financial year, with no intention of listing. How is this issue treated under the Companies Act, 2013?

The issue is a deemed public offer governed by Part I of the Chapter. Offering or allotting securities to more than the prescribed number of persons is treated as an offer to the public regardless of payment received or any intention to list.

  1. AAs a valid private placement because the company does not intend to list
  2. BAs a valid private placement if the money is received through banking channels
  3. CAs a private placement subject only to a penalty for the excess persons
  4. DAs a deemed public offer governed by Part I of the ChapterCorrect

Explanation

Explanation III to section 42 treats an offer or allotment to more than the prescribed number of persons as an offer to the public, whether or not payment is received and whether or not listing is intended. Section 42(11) also deems a non-compliant private placement under sub-section (2) to be a public offer. Hence the intention not to list is irrelevant.

Did you get it right without looking?

One question tells you little. A timed set on Issue and Listing of Non-Convertible Securities shows your real accuracy, how long you take and where you lose marks.

Practise Issue and Listing of Non-Convertible SecuritiesFree diagnostic mock

More Issue and Listing of Non-Convertible Securities questions