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ISSUE OF SHARES
Under the Companies Act 2013, A Private Company can raise funds in the following ways:
1. Private Placement
2. Right Issue
PRIVATE PLACEMENT
Private Placement is issuing share capital to a select group of people, including or not the existing shareholders, like friends, family members, Angel investors, Venture Capitalists etc.
As per Companies Act 2013, private companies have to follow the processes for private placement of securities. Securities means equity shares, preference shares and debentures, convertible instruments, redeemable instruments.
“Private Placement” means any offer of securities or invitation to subscribe securities (equity or securities that convert to equity) to a select group of persons by a company, other than by way of public offer, through issue of a private placement offer letter. (Section 42 of Companies Act 2013 and Rule 14 under Companies (Prospectus and Allotment of Securities) Rules 2014)
RIGHTS ISSUE
Requirements
For a pro-rata issuance of equity and securities converting into equity, to existing equity shareholders in the company, then the shareholders of the company has to approve through a special resolution.
Allotment
On receipt of application money
- File form PAS -3 (return of allotment) in 30 days of allotment of shares.
- Resolution and List of allottees to be attached with the form
- Mention PAN & e-mail address, of each member to whom share allotted, in the list of allottees.
- Share to be allotted within 60 days of receipt of allotment money.
Share Certificate
In both the cases i.e. private placement or rights issue, share certificates should be issued within 60 days of the allotment.