What is the maximum number of investors allowed in a private placement under Section 42?

It can be offered to a maximum of 200 persons in a financial year, excluding qualified institutional buyers and employees offered securities under ESOP schemes. This limit applies across all private placement offers made during the same financial year.

Can a private limited company undertake a private placement?

Yes, private limited companies can issue securities through private placement under Section 42, provided they comply with all the requirements specified in the Companies Act and related rules.

What happens if allotment is not completed within 60 days of receiving the application money?

If the allotment is not completed within 60 days, the company must return the money to the subscribers within 15 days after the expiry of the 60-day period. Failure to do so may attract penalties and interest payments.

Is SEBI approval required for private placement?

For unlisted companies, SEBI approval is not required for private placement. However, listed companies must comply with additional SEBI regulations governing preferential allotments and private placements.

Can securities issued through private placement be transferred?

Yes, securities issued can be transferred, subject to the conditions specified in the articles of association of the company and any lock-in period restrictions that may apply (particularly for listed companies).

What are the penalties for non-compliance with Section 42 provisions?

Non-compliance with Section 42 can result in penalties, including fines for the company (up to the amount raised through the private placement) and its officers (up to Rs. 2 crores or imprisonment up to one year, or both). Additionally, the company may be required to refund all monies to subscribers with interest.

Is there a minimum investment amount required in private placement?

Yes, the minimum investment size is typically Rs. 20,000 of face value per investor, though specific requirements may vary based on the type of security being offered.