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

Meridian Infra Ltd, an unlisted public company, makes a private placement offer. The offer is made to 210 persons in a financial year, excluding qualified institutional buyers and employees under a stock option scheme. Which statement reflects the correct position?

The offer is treated as a public offer, not a private placement. A private placement cannot go to more than 200 persons in a financial year, excluding qualified institutional buyers and employee stock option holders, so offering to 210 means prospectus rules apply to the issue.

  1. AIt is valid as a private placement because the company is unlisted
  2. BIt is valid if the offer is made through private placement offer letter in Form PAS-4
  3. CIt is treated as a public offer and must comply with prospectus requirements, since the limit of 200 persons is exceededCorrect
  4. DIt is valid if a special resolution is passed and the offer is made in tranches within the year

Explanation

A private placement offer cannot be made to more than 200 persons in a financial year, excluding QIBs and employees under ESOP. Exceeding this limit makes the offer a public offer, so prospectus provisions apply. The Form used and special resolution do not alter this limit, and the company being unlisted is irrelevant.

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