Skip to content

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

Tarang Retail Ltd, a public company, intends to make a private placement of securities to selected investors. Which of the following is correct under the Companies Act, 2013 regarding a private placement offer?

A private placement can be made to not more than 200 persons in a financial year, excluding qualified institutional buyers and employees under ESOP. Going beyond that limit makes it a public offer. A prospectus is not required for a genuine private placement.

  1. AThe offer may be made to any number of persons without limit
  2. BThe offer may be made to more than 200 persons in a financial year in aggregate, excluding qualified institutional buyers and employees under ESOP
  3. COffers or invitations made to not more than 200 persons in a financial year, excluding QIBs and employees under ESOP, count as private placement, and an offer to more than this limit is treated as a public offerCorrect
  4. DPrivate placement requires issue of a prospectus in every case

Explanation

Private placement is limited to 200 persons in a financial year, excluding qualified institutional buyers and employees offered ESOP. Exceeding the limit makes the offer a public offer. A prospectus is not required for private placement, which uses a private placement offer letter.

Did you get it right without looking?

One question tells you little. A timed set on Prospectus and Allotment of Securities shows your real accuracy, how long you take and where you lose marks.

Practise Prospectus and Allotment of SecuritiesFree diagnostic mock

More Prospectus and Allotment of Securities questions