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

Vikram Steel Ltd, a public company, wants to issue securities by a private placement. Which of the following correctly describes a requirement for private placement under the Companies Act, 2013?

A private placement is made only to a select group identified by the board, through a private placement offer letter in the prescribed form, and not by public advertisement. The number of offerees is restricted, money must come through banking channels and records of offerees must be kept.

  1. AThe offer can be made to any number of persons without limit
  2. BThe offer must be made only to a select group of persons identified by the board, through a private placement offer letter in the prescribed form, and the offer is not made by public advertisementCorrect
  3. CMoney must be received in cash only and never through banking channels
  4. DNo special resolution or record of the offerees is needed in any case

Explanation

Private placement is an offer to a select group, identified by the board, made through a private placement offer letter in the prescribed form. It is not made through public advertisement and offers are restricted to a limited number of persons. Receipt must be through banking channels, and records of offerees must be kept, so the other options are incorrect.

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