PRIVATE PLACEMENT

As per section 23 of Companies Act, 2013, private companies can issue securities through :-

1. by way of right issue or bonus issue or
2. through Private Placement

“Private Placements” means any offer of securities or invitation to subscribe securities to a select group of persons by a Company (other than by way of public offer ) through issue of Private Placement offer letter which satisfies the condition specified in this section.

Section 42 of Part II of Chapter III deals with Private Placement stating the following :-

1. Companies can make Private Placement through issue of Private Placement offer letter.
2. Companies can offer securities through private placements up to two hundred persons in a Financial year.
3. Company shall not make fresh issue of any kind of securities unless previous issue of securities is completed.
4. Company should accept consideration for issue of shares only through cheque and demand draft .
5. Company shall allot securities with in 60 days of receipt of application money.
6. Company shall make offer through private placement only to select group of people whose names are recorded in the Board meeting, authorizing issue of shares through Private Placement.
7. If the company, contravenes any of the provisions of this section, than private placement offer shall be deemed as Public offer attracting all the provisions which is applicable on Public offer.
8. Money received on application under this section shall be Kept in a separate bank account in a scheduled bank and shall not be utilized for any purpose other than -
   a) for adjustment against allotment of securities; or
   b) for the repayment of monies where the company is unable to allot securities.

Procedure for Private Placement offer letter :-

1. Company shall hold Board meeting to give in principle approval to issue shares through Private Placement. Company shall record the names of investors to whom shares shall be allotted on Private Placement and shall give approval to call for call General Meeting to take shareholders Approval for issuing shares through Private Placement.

2. Company shall send 21 days notice to all shareholders. Explanatory statement accompanied with notice to the shareholders shall state basis or justification for the price at which at which the offer for invitation is being made. Valuation report taken from registered valuers should be annexed with the notice.

3. In an Extra – ordinary General Meeting, Company shall pass special resolution for issue of shares through Private Placement and this special resolution should be filed with Registrar of Companies within 30 days in form MGT 14.

4. After taking special resolution in General Meeting, Company shall send invitation to subscribe for securities through issue of a Private Placement Offer Letter in form PAS-4. Application form serially numbered with a name of addressee written on it should be sent along with Form PAS – 4. Form PAS 4 should be sent only to those investors whose name is recorded for issue of shares though Private Placement. Only the addressee to whom Application form along with Letter of offer is sent shall be allowed to invest through the Application form sent to him. It should be stated in the Application form that payment for subscription of securities should be made by the addressee/investor through their own Bank Account.

5. Company shall hold Board Meeting within 60 days of receipt of money. In this Board Meeting, Company shall allot securities to the investor and within 30 days of allotment shall file return of allotment with Registrar Of Companies through Form PAS – 3 along with complete list of securities

6. Company shall maintain a complete record of Private Placement offers in form PAS - 5  

Corporate Social Responsibility

1. Under Section 135 of Companies Act, 2013, every company has to constitute Corporate Social Responsibility committee whose :-

• Net worth is above Rs 500 Crores or,
• Turnover is above Rs 1000 Crores or,
• Net Profit before tax is Rs 5 Crores or more.

2. Composition of Corporate Social Responsibility Committee :-

• CSR committee shall have three or more directors our of which one should be independent director.
• However, as per section 149 of Companies Act, 2013, if there is no requirement to appoint independent director on Board than no need to appoint independent director in CSR committee also.
• In case of private companies having two directors, than appointment of two directors in CSR committee is suffice as per law.

3. Corporate Social Responsibility Policy :-

• CSR committee shall formulate CSR policy.
• This CSR policy shall indicate projects/programs as provided in schedule VII to the Companies Act, 2013 which company intends to take on.
• Amount of expenditure apportioned for each project/program.
• Board shall approve such policy and put it in Board's Report and on Company's website, if any.

4. As per section 135 of the Companies Act, 2013, it is mandatory for the companies coming under the stated benchmark to set aside 2% of Average Net Profit of last three years for CSR expenditure. This CSR expenditure has to be carried out as per CSR policy framed by CSR committee and approved by Board

4. If the company ceases to be a company under section 135 of the Companies Act, 2013 than after three financial years, company can dissolve its CSR committee.

4. Failing to comply the provisions of Section 135 of Companies Act, 2013, company has to specify reasons behind the same in there Board Report.

4. Foreign Companies can en route there CSR expenditure in India through Indian subsidiaries.

4. One off events are not qualified for CSR expenditure.

4. The company may decide to undertake its CSR activities approved by the CSR committee, through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the act or otherwise :-

Provided that -

1. if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects ;
2. the company has specified the project or programs to be undertaken through theses entities, the modalities of utilization of fund on such projects or programs and the monitoring and reporting mechanisms. ( produced as it is from the rules )

10. Every Company shall include holding and subsidiary companies.

10. CSR expenditure shall include all expenditure including contribution to corpus for projects or programs relating to CSR activities approved by the board on the recommendation of the CSR committee, but does not include any expenditure on an item not in conformity or not in line with activities which fall within the purview of Schedule VII of the act. ( produced as it is from the rules )

Source :-

1. Section 135 of the Companies Act, 2013
2. Companies (Corporate Social Responsibility policy) Rules, 2014
3. Amended rules dated 12^th September, 2014
4. Amended Rules dated 19^th January, 2015
5. General Circular No. 21/2014
6. General Circular No. 36/2014 

Form MGT 14

Filing of form MGT 14 after the Notification dated 05.06.2015

Applicability of filing MGT 14 in case of both Private and Public Company

1. Special Resolutions;

2. Resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would have been effective for their purpsoe unless they had been passed as special resolutions;

3. any resolution of the Board of Directors of the Company or agreement executed by the company, relating to the appointment, re-appointment or renewal of the appointment, or variations of the terms of appointment, of a managing director;

4. resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members

5. resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304;

6. any other resolutions as may be prescribed and placed in a public domain

Applicability of filing MGT 14 only in case of Public Company

1. Resolution under Section 180
2. to make call on shareholders in respect of money unpaid on their shares;
3. to authorize buy back of securities under section 68;
4. to issue securities, including debentures whether in or outside India;
5. to borrow monies;
6. to invest the funds of the company;
7. to grant loan or give guarantee or provide security in respect of loans;
8. to approve financial statements and the Board's resport;
9. to diversify the business of the company;
10. to approve amalgamation, merger or reconstruction;
11. to takeover a company or acquire a controlling or substantial stake in other company;
12. to make political contribution;
13. to appoint or remove Key Managerial Personnel;
14. to appoint internal auditors and secretarial auditor;