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

Orion Finserve Ltd made a private placement of debentures. Which statement about the process is correct under section 42 of the Companies Act, 2013?

A private placement offer is made only to identified persons and carries no right of renunciation. Payment must be through banking channels, not cash, and the company cannot advertise the issue publicly, so the option stating no renunciation is correct.

  1. AThe offer may carry a right of renunciation in favour of other investors
  2. BSubscription money may be paid in cash if the amount is small
  3. CThe company may advertise the issue in media to attract identified persons
  4. DThe offer must be made to identified persons and cannot carry any right of renunciationCorrect

Explanation

Section 42(3) provides that the private placement offer and application shall not carry any right of renunciation, and it is addressed to identified persons. Payment must be by cheque, demand draft or other banking channel, not cash, and public advertisements are prohibited under section 42(7).

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