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CA Foundation · Business Laws · The Companies Act, 2013

Neha Textiles Ltd, a public company, wants to offer shares to a select group without issuing a prospectus to the general public. Under the Companies Act, 2013, which is a private placement?

A private placement is an offer of securities to a select group of persons, other than a public offer, made through a private placement offer letter and within the prescribed limit on the number of persons. A prospectus or public advertisement indicates a public offer instead.

  1. AAn offer of securities to a select group of persons through a private placement offer letter, within the prescribed limit on the number of personsCorrect
  2. BAn advertisement inviting any member of the public to apply for shares
  3. CA newspaper notice of a rights issue to existing members only
  4. DAn offer made through a prospectus filed with the Registrar

Explanation

Private placement means offering securities to a select group of persons by a company, other than by way of a public offer, through a private placement offer letter. It is subject to the prescribed cap on the number of persons offered in a financial year. A prospectus-based offer or public advertisement is a public offer, and a rights issue is a distinct mode.

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