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

Sunrise Textiles Ltd, an unlisted public company, plans a private placement of debentures. Under the Companies Act, 2013, to whom may the private placement offer be made?

A private placement may be made only to a select group of persons identified by the Board. It cannot be offered to the public through advertisements or open invitations, and the offer and application carry no right of renunciation.

  1. AAny member of the public who responds to a newspaper advertisement
  2. BA select group of persons identified by the BoardCorrect
  3. CAll existing shareholders in proportion to their holdings, with a right of renunciation
  4. DAny person who applies at the company's website without prior identification

Explanation

Section 42(2) provides that a private placement is made only to a select group of persons identified by the Board. Public advertisements are barred, and the offer carries no right of renunciation. Hence open invitations or renounceable offers are not private placement.

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