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

Sunrise Foods Ltd, a public company, wants to issue securities by way of a private placement. Which of the following correctly states a condition under the Companies Act, 2013 for a valid private placement offer?

A valid private placement requires an offer to identified persons through the prescribed private placement offer letter, with money received only through banking channels and not in cash. It cannot be made through public advertisement, and an offer letter in the prescribed form is mandatory.

  1. AThe offer may be made to any number of persons through public advertisement
  2. BApplication money may be accepted in cash from the identified persons
  3. CThe offer must be made only to identified persons, and payment must be received through banking channels and not in cashCorrect
  4. DAllotment may be made without any offer letter in the prescribed form

Explanation

A private placement is an offer to a select group of identified persons through a private placement offer letter in the prescribed form, and not by public advertisement. Payment must be accepted by cheque, demand draft, other banking channels or electronic mode, and not in cash. Hence only the option requiring identified persons and banking channel payment is correct.

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